Geopolitical Diary: The Economic and Political Effects of an Iranian ThreatJuly 2, 2008The rumors and denial of rumors continue to swirl around Iran. Endless leaks of decisions made by the United States and/or Israel to strike at Iran’s nuclear facilities continue. In the latest variants, Americans warned that Israel might already have decided to attack Iran, with the date set sometime between the U.S. election and Inauguration Day. Or it might be the Americans attacking. It is not clear what effect this is having on Iran, but it is certainly making others players nervous, not the least of which are the oil markets.

There is an important interaction going on between two geopolitical elements. One is the attempt by Israel and the United States to force the Iranians to capitulate on the nuclear issue by convincing them that an attack is inevitable if they don’t. The other is the impact of oil prices on the global economy and thereby on international power relations. An attack on Iranian nuclear facilities would obviously spike oil prices. The real question would be whether that spike in prices would last and how high it would go. The answer to that question rests in what the Iranians would do in response. The Iranians have now been duly warned that an attack is coming. One would think that they have considered their response.

The obvious response, if the Iranians are capable of it, would be to block the Strait of Hormuz, through which Saudi and Kuwaiti oil flows to the world markets. The obvious means for this, as we discussed in an analysis Tuesday, would be to mine the Strait. That might not be as easy as it appears, since the U.S. Navy could deploy in the Strait en masse and block any Iranian ship that might try to approach the channel. But the Iranians would likely retain the ability to mine parts of the Persian Gulf itself. Iran has a long coast and a lot of small boats. It wouldn’t take much to scatter mines.

Most importantly, it would not have to be effective. The mere possibility of mines — the uncertainty factor — would not only slow down the movement of tankers in the Gulf, but also spike insurance rates. Tankers cost a lot of money and their cargoes these days are incredibly expensive. Risking both ship and cargo is not something tanker owners like to do. They buy insurance. If the possibility of mines in the Gulf existed, insurance rates would not only rise, but might become altogether unavailable. Insurance and re-insurance companies these days do not have enormous appetites for unpredictable risk involving large amounts of money. And without insurance, as we saw during the tanker wars in the 1980s, owners won’t take the risk themselves.

Iran’s counter could be to increase the potential risk to the point where insurers back off. At that point, governments would have the option of insuring tankers themselves. Given how quickly governments move, particularly in what would have to be an international undertaking, oil supplies could be disrupted for days or even weeks. At this point, speculators and psychology aside, prices would spike dramatically. The creaking sound would turn into a cracking sound for the world economy.

Herein lies the fear for markets. The longer the psychological warfare goes on, the more nervous they will become and the more pressure there will be on the global economy. The thought of this going on until after the November election may or may not panic the Iranians. But it is certainly worrying the markets at a time when the markets should be calmed. It is hard to figure out whether months of uncertainty or rapid action would have more soothing results.

Conducting an extended psychological campaign against Iran makes complete politico-military sense. It does not make politico-economic sense. It creates a massive unknown in a situation where no action may actually be taken. Here is the problem. It is clear that Israel and the United States don’t really want to attack Iran. If they wanted that, they would shut up and do it. But that’s a guess. So the markets must take into account a possible attack and an Iranian counter. Hitting Iran fast, taking the hit and then calming the markets by showing that the Iranians can’t disrupt tanker traffic makes more sense from an economic standpoint than constantly creating unknowns.

The problem is that neither Israel nor the United States is certain that Iran can’t disrupt tanker traffic. And they don’t want Iran to have nuclear weapons. Some decisions have to be made. Attack, don’t attack — but stop threatening to attack.stratfor

TEHRAN (Reuters) - Iran will hit Tel Aviv, U.S. shipping in the Gulf and American interests around the world if it is attacked over its disputed nuclear activities, an aide to Iran's Supreme Leader was quoted as saying on Tuesday.

"The first bullet fired by America at Iran will be followed by Iran burning down its vital interests around the globe," the students news agency ISNA quoted Ali Shirazi as saying in a speech to Revolutionary Guards.

The United States and its allies suspect Iran is trying to build nuclear bombs. Tehran says its program is peaceful.

Leaders of the Group of Eight rich countries expressed serious concern at the proliferation risks posed by Iran's nuclear program.

In a statement issued after G8 leaders met in Hokkaido, northern Japan, the grouping urged Tehran to suspend all enrichment-related activities.

"We also urge Iran to fully cooperate with the IAEA," the G8 said, referring to the International Atomic Energy Agency.

French President Nicolas Sarkozy said earlier that major world powers had decided to send European Union foreign policy chief Javier Solana to Iran for talks on an incentives package they offered last month to induce Tehran to change its nuclear policy.

Sarkozy did not say when Solana would travel to Tehran. Iran formally replied on Friday to the offer by the United States, France, Britain, China, Russia and Germany.

France said Iran's response had ignored the world powers' demand for a suspension of uranium enrichment before talks on implementing the package -- a condition rejected on Monday as "illegitimate" by Iranian President Mahmoud Ahmadinejad.

'GREAT HOPE'

In Prague, U.S. Secretary of State Condoleezza Rice said there were ways that Iran might wish to talk with Solana or others in order to get that suspension to take place.

"I did speak with Javier Solana yesterday. He is in contact with his Iranian counterpart and it's our great hope that the Iranians will avail themselves of this opportunity to get on the right side of the international community."

Shirazi's comments intensified a war of words that has raised fears of military confrontation and helped boost world oil prices to record highs in recent weeks.

"The Zionist regime is pressuring White House officials to attack Iran. If they commit such a stupidity, Tel Aviv and U.S. shipping in the Persian Gulf will be Iran's first targets and they will be burned," Shirazi was quoted as saying.

Israel, believed to be the Middle East's only nuclear-armed power, has vowed to prevent Iran from acquiring an atomic bomb. The United States says it wants to resolve the dispute by diplomacy but has not ruled out military action.

In April, Israel's Infrastructure Minister Binyamin Ben-Eliezer, who is a former army general and defense minister, told Israeli media: "An Iranian attack will prompt a severe reaction from Israel, which will destroy the Iranian nation."

'VERY SCARY'

Tel Aviv is an Israeli coastal metropolis hit in 1991 by Scud missiles launched by former Iraqi leader Saddam Hussein during a U.S.-led war with Baghdad.

"I think it is very scary what they are saying," said Roy Katalan, holding his infant daughter in his arms on a Tel Aviv beach. "I think we should take him (Shirazi) seriously."

The latest Iranian threats had little impact on financial markets in Israel. "This has no relevance on dollar-shekel trade. I assume if we see a strike, there will be a reaction," said Neil Corney, treasurer for Citigroup's office in Tel Aviv.

Oil tumbled to below $136 on Tuesday, dropping by about $10 this week on a stronger dollar and eased concern over an Atlantic hurricane. Oil had hit a record $145.85 last week on tensions over Tehran's nuclear ambitions and worries a brewing storm could hit oil fields in the Gulf of Mexico.

Iran has threatened to close the Strait of Hormuz if it comes under attack. About 40 percent of globally traded oil moves through the Gulf waterway.

In Washington, the U.S. Treasury designated four Iranian firms and four individuals on Tuesday for their ties to Iran's nuclear and missile programs, a move that bans U.S. companies from dealing with them and freezes any assets they may have under U.S. jurisdiction.

The Revolutionary Guards' commander of artillery and missile units, Mahmoud Chaharbaghi, said 50 brigades of his forces had been equipped with what he called smart cluster munitions.

"All our arms, bullets and rockets are on alert" to defend Iranian territory, Hemayet daily quoted him as saying.

U.S. and British naval forces wrapped up military exercises in the Gulf and said they were unrelated to tensions with Iran. The Bahrain-based U.S. Fifth Fleet said "Exercise Stake Net" took place in the central and southern Gulf and was part of training aimed at protecting the region's oil infrastructure.

Iran's Missile ThreatJuly 10, 2008; Page A14Talk about timing, perhaps fortuitous. On Tuesday, Secretary of State Condoleezza Rice was in Prague signing an agreement that's a first step toward protecting Europe from ballistic missile attack. As if on cue, Tehran yesterday tested nine missiles, including several capable of reaching southern Europe, as well as Israel and U.S. troops stationed in the Middle East. Remind us. Who says Iran isn't a threat?

The chief naysayer is Moscow, which continues to insist that the planned U.S.-led missile defense for Europe is aimed at defeating Russian missiles, not Iranian ones. This was Vladimir Putin's line, and the new Russian President, Dmitry Medvedev, picked it up yesterday, saying that the antimissile system "deeply distresses" Russia and is a threat to its national security. The Russian Foreign Ministry issued a statement warning that if the system is deployed, "we will be forced to react not with diplomatic, but with military-technical methods." Good to see the Russians haven't lost their subtle touch.

No one in that neighborhood – least of all the Russians – actually believes Iran's missile program is anything but dangerous. Russians talk privately about the Iranian threat, and it's not hard to imagine a scenario whereby Tehran shares a missile – and perhaps a nuclear warhead – with its brother Muslims in Chechnya.

In any case, Washington's proposed antimissile system for Europe is designed to defend against one or two missiles launched from Iran, not against the thousands of missiles in the Russian arsenal. It would include a tracking radar in the Czech Republic and 10 interceptors in Poland (or perhaps Lithuania, if the Poles can't get their act together). Russia's claim that this highly limited defense poses a threat to its nuclear deterrence is absurd.

Yesterday's tests offered no big surprises about Iran's missile technology, but they are a useful reminder of just how real the Iranian threat is – and how rapidly it is growing. One of the missiles tested was the latest update of the Shahab-3, which has a range of about 1,250 miles.

Replace the payload with a lighter one – say, a nuclear warhead – and the range gains 1,000 miles. Add a booster and the range can be extended even farther. North Korea did just that with its Taepodong missile – technology that it passed along to Iran. U.S. intelligence estimates that Iran will have a ballistic missile capable of reaching New York or Washington by about 2015.

Iran may already have the capability to target the U.S. with a short-range missile by launching it from a freighter off the East Coast. A few years ago it was observed practicing the launch of Scuds from a barge in the Caspian Sea.

This would be especially troubling if Tehran is developing EMP – electromagnetic pulse – technology. A nuclear weapon detonated a hundred miles over U.S. territory would create an electromagnetic pulse that would virtually shut down the U.S. economy by destroying electronic circuits on the ground. William Graham, head of a Congressional commission to assess the EMP threat, testifies before the House Armed Services Committee this morning. We hope someone asks him about Iran.

The proposed "third site" in Europe is part of a rudimentary missile-defense system that the U.S. already has in place for the homeland. It's one of the unsung successes of the Bush Presidency, and the U.S. and its allies are safer for it. Yet few Democrats are willing to acknowledge it. That apparently includes Barack Obama, whose response to Iran's missile tests yesterday was to call for more direct diplomacy with Tehran, tougher threats of economic sanctions and bigger incentives to behave – all of which Tehran has sneered at numerous times.

Some 30 nations, including North Korea and Syria, have ballistic missiles and their proliferation is sure to continue. The European site is part of the Bush Administration's vision of missile defense with a global reach. Iran's latest missile tests show that Europe needs an antimissile system more than ever.

On the heels of a recent Israeli Air Force exercise — and cautionary words from the United States — Iran, quite literally, fired back on Wednesday. According to military and press accounts, Iranian Revolutionary Guards Corps (IRGC) units [1] test-fired nine missiles, including a medium-range Shahab-3, capable of reaching Israel.

While the Iranian missile test was enough to ratchet up regional tensions (and trigger a new spike in oil prices), it is possible to read too much into the day’s events, at least militarily. First, this type of drill is hardly an unusual event; IRGC missile units conduct an average of two or three major exercises each year, and missile crews practice continuously at their garrisons. Preparations for the test had been underway for several days and, presumably, detected by U.S. and Israeli intelligence.

Secondly, reporting on the missile test — or at least the information available so far — ignores the salient question about the supposed “highlight” of the exercise: the launch of an extended range Shahab-3 that could target Israel. This is not the first time Iran has tested a longer-rage version of the Shahab-3; launches involving that type of missile date back almost a decade.

But many of those tests had something in common: they resulted in failures, ranging from missiles that blew up in flight, failed to achieve the desired range, or strayed badly off course. So far, Tehran hasn’t provided details on Wednesday’s Shahab-3 launch, only saying that it has a maximum range of 1250 miles and is capable of carrying a one-ton payload. If the extended-range Shahab-3 remains unreliable, it will pose less of a threat to Israel and other potential targets in the Middle East.

In fact, Iran reportedly stopped work on another missile program (dubbed the Shahab-4), replacing it with BM-25 intermediate range missiles from North Korea. The BM-25 — based on an old Soviet SLBM design — arrived in Iran more than a year ago but has not been operationally tested. Cancellation of the Shahab-4 and slow progress with the BM-25 suggest continuing problems with Tehran’s intermediate and long-range missile programs.

Deficiencies can also be found among operational systems. Media reports on Wednesday’s launch are wildly inaccurate in one important element: characterizing many of the missiles tested as long-range systems. The Shahab-3 is actually classified as a medium-range system; the other missiles tested appear to be short-range systems, capable of reaching targets less than 150 miles away — and with only limited accuracy.

In fact, the three missiles that were launched simultaneously (and highlighted in press photos) are unsophisticated battlefield rockets, probably a Zelzal variant. Iran first introduced the Zelzal in the mid-1990s; it was based on the Russian Frog-7 design, which dates from the 1950s. Not exactly state-of-the-art. But the western press accepts Iranian military claims uncritically and often inflates the threat, much to Tehran’s delight.

Remember that advanced fighter that Iran built, supposedly equal to our own F/A-18? It’s actually a remanufactured U.S. F-5, with a second vertical stabilizer and marginally upgraded avionics. Or that high-speed torpedo? It is based on a Soviet design from World War II, requiring precise pre-launch calculations. If the target changes speed, zig-zags, or does anything to upset the firing solution, the torpedo misses its mark.

But with the media unwilling (or unable) to call Tehran’s military bluff, the exaggerated claims continue. After Wednesday’s launch, a senior Iranian officer told reporters that “our missiles are ready for the shooting at any time or place.” He said the purpose of the exercise was to show “we are ready to defend the integrity of the Iranian nation.”

In reality, his claims about a “hair-trigger” alert status are a bit of a stretch. Under some scenarios, it would take Iranian crews several hours to mount a strike due to the technology used in their missile systems. For example, older Shahab-3 variants use highly-voliatle liquid fuel, which must be loaded onto the missile before it can launch. While a highly-proficient crew can prepare the missile for firing in about an hour, less-skilled personnel may need two or three hours to complete the same task.

That’s a critical concern because it means the missile will sit at a fixed site while the preparations are made, increasing its vulnerability to detection and air attack. The problem is further compounded by the limitations of some Shahab-3 launchers which cannot raise an already-fueled missile to the firing position. As a result, the missile must be elevated prior to fueling, making the Shahab-3 easier to detect.

However, those problems do not mean that Iran’s missile threat can be ignored or marginalized. Ballistic missile “hunting” remains an imprecise art, at best. In a country like Iran (which is roughly the size of Alaska), there are plenty of launch sites where Shahab-3 crews could escape detection and targeting. Tehran also has detailed knowledge of our intelligence, surveillance, and reconnaissance systems, sometimes scheduling missile movements and other activities during “gaps” in overhead coverage.

Iran has also invested in underground facilities for its missile units, allowing crews to conduct maintenance and training operations without being detected by intelligence systems. One such facility, built specifically for the Shahab-3, contains a vertical launch shaft, permitting the missile to be fueled and fired with minimal warning. Tehran has also begun building in-ground silos for some of its missiles, making it more difficult to monitor activity. These trends, coupled with Iran’s efforts to build more missiles and outfit them with nuclear weapons, are reasons for concern.

Still, it’s important to place events like the missile test in their proper context, at least from an operations perspective. Iran’s ballistic missile forces are improving, but they remain hindered by old technology and limited accuracy. It would be difficult (at least over the short term) for Tehran to build a nuclear weapon small enough to fit atop one of its existing missiles. Until that obstacle is overcome, Iran will lack a viable option for delivering a nuclear device, particularly against distant targets.

The bad news is that Iran has the cash, resolve, and technological access to overcome these obstacles. Liquid-fueled systems are being replaced by solid-fueled missiles and rockets (which can be launched in a matter of minutes) and left unchecked, Tehran will eventually get its hands on technology for smaller nuclear warheads, ideal for short and medium-range missile systems. Measures aimed at concealing missile and nuclear activity are also improving.

From a technical and military standpoint, Iran revealed nothing new in Wednesday’s test. Indeed, the event was (to some degree) an exercise in opportunism, allowing Tehran to grab some headlines, boost oil prices, and send messages to its adversaries at the end of a G-8 summit and in the middle of a U.S. presidential campaign. While preparations for the test began weeks or months ago, it is possible that Iran delayed the launch until the “right” political moment arrived.

And that brings us to a pair of salient points, with clear implications for our future dealings with Tehran. First, it would be reassuring to know that our intelligence community wasn’t fooled by today’s launch. A good barometer in that area is the presence of an RC-135 Cobra Ball aircraft, which tracks missile tests at long range. With sufficient warning from various intel sources, “The Ball” is usually in position ahead of time, ready to collect data with its infrared telescopes and other on-board systems. The appearance of Cobra Ball (or other intel platforms) also sends a powerful message to our adversaries: we know what you’re up to. On the other hand, if our sensors weren’t in position, it would raise the dire prospect that we’re losing track of the Iranian missile program and other, more ominous activities.

The final point focuses on the larger question of dealing with Iran and its WMD ambitions. Not long after Wednesday’s missile salvo was revealed, presumptive Democratic presidential nominee Barack Obama called for more sanctions against Iran and direct negotiations. But we’ve been trying that approach for several years (largely through the European Union), with no appreciable progress. Why does Mr. Obama believe the failed policies of the past will now work with the clerics in Tehran?

If anything, the missile test is a reminder that there are limits to diplomacy, and at some point the next commander-in-chief may be forced to try something else. Senator Obama’s refusal to consider those other options will only embolden Iran, and likely lead to further acceleration of its missile and nuclear programs. There’s no way you can read “too much” into that reality.

Former CIA Agent in Iran Comes In from the HeatJuly 8, 2008 - by 'Reza Khalili'

[Editor’s note: Pajamas Media has spoken with “Reza Khalili’s” attorney in Washington, D.C. who confirmed Khalili “had a working relationship with a US intelligence agency.” We have also seen a copy of the June 5, 2008 email sent by the agency’s “Manuscript Review” department authorizing the publication of this article.]

In an interview with Roger L. Simon, “Khalili” further amplifies his accusation of Iranian involvement in Lockerbie and addresses the controversial question of whether the Shiite mullahs would form alliances with Sunnis. A transcript of the interview is [1] here. More interviews with “Khalili” in disguised video form will be coming in the future from PJM. ]

The men who ordered the destruction of the Pan Am flight over Lockerbie and the bombings of the Marine Corps barracks in Lebanon, the Jewish community center in Buenos Aires, and the Khobar Towers in Saudi Arabia are pursuing the nuclear program in Iran and with one goal in mind: to obtain The Bomb.

And they want to destroy you.

After the Iranian Revolution, I was an officer in the Revolutionary Guards. I was also a spy working for the CIA, code name Wally. My position in the Guards gave me access to the Khomeini regime’s deep secrets and a firsthand look at the unfolding horror: torture, rapes, executions, assassinations, suicide bombers, training of terrorists, and the transfer of arms and explosives to other countries to support terrorist attacks. I risked my life and my family’s trying to expose this regime because I believed it should be stopped. Once again I incur such risks to bring awareness that lack of action endangers the world.

In the mid-80s, I reported to the CIA that the Revolutionary Guards’ intelligence unit had information that Saddam Hussein had made a strategic decision to acquire nuclear arms. I heard this from several sources within the Guards and also in a conversation with a member of the intelligence unit, who told me that the Guards were informed through arms dealers in the black market that Saddam was desperately looking for an atomic bomb. It was then that the Guards’ commanders and Iranian leadership decided to go nuclear and actively shop for components in the black market because they made a determination that the Iran-Iraq war could not have been won without a nuclear bomb. Mohsen Rezaei, then-commander of the Revolutionary Guards, requested permission from Ayatollah Khomeini to make Iran a nuclear power. Khomeini agreed.

Some years later, while I was stationed in Europe working for the CIA, I met with three Iranian agents who were shopping for nuclear parts. The agents confirmed what I had heard through the Guards: that Hashemi Rafsanjani had promised retaliation for the downing of an Iranian civilian jet by a U.S. warship over the Persian Gulf on July 3, 1988, toward the end of the Iran-Iraq war. According to the U.S government, an inexperienced crew mistakenly identified the Iranian Airbus as an attacking F-14 fighter; 290 people were killed. The agents said it was Rafsanjani who ordered the bombing of Pan Am Flight 103 over Lockerbie, Scotland on Dec. 21, 1988, which killed 270 people. They also talked about involvement of a Palestinian man and the radio transmitter that carried the bomb, information that I passed on to the CIA. I made an assessment at that time that Iran had ordered, through surrogates, the bombing of the Pan Am flight.

There was not much of a follow-up on Iran’s involvement in that incident because Rafsanjani had become the president of Iran, and my CIA contact told me to consider Rafsanjani the new king of Iran. It was apparent to me that President George H.W. Bush was going to support and trust Rafsanjani as the new ruler of Iran. He was promised cooperation and good relations by the mullahs, and the U.S. administration and the CIA in turn were convinced that the mullahs were open to a new chapter in Iran-U.S relations.

I believed then, as I do now, that the mullahs would never abandon their ambitions, and that after 29 years of negotiations by Europe and world powers, the world has yet to understand that the mullahs will not change direction or behavior. In the early ’90s, the senior Bush administration and the CIA finally realized they were being duped — the mullahs’ promises never materialized. The CIA asked me to look for an Iranian who could testify that Iran was in the process of making a nuclear bomb. That request was later withdrawn.

Iran remains the main sponsor of terrorism around the world. Iranian consulates, embassies, airlines, and shipping line offices are the main hub for terrorist activities. Money, arms, and explosives are transferred through these centers to fund terrorist groups and jihadists. Quds Force units of the Revolutionary Guards use the Iranian consulates as their command and control centers to plan and carry out assassinations, kidnappings, and terrorist activities. The mullahs even transferred money and arms in state visits using their high-ranking officials, knowing full well that because of diplomatic immunity they would not be subject to search during such visits. As I reported to the CIA, these activities were closely coordinated through Iran’s foreign ministry, the ministry of intelligence, and the Revolutionary Guards.

And then there is the Syrian connection, which facilitates the Revolutionary Guards in training and arming Hezbollah, based in Lebanon, and Hamas, based in the Palestinian Territory. Syrian facilities and political channels are at the Revolutionary Guards’ disposal, expanding their terror network. The mullahs not only support Syria with massive financial aid in hundreds of millions of dollars but also share missile-delivery technology and other military armaments. The Quds Force leadership is in close contact with Syrian military leaders, coordinating terrorist activities throughout the Middle East.

As Iran pursued its nuclear ambitions over the past few years, it needed to keep U.S. forces on the defensive in Iraq so Washington would not think of invading Iran. Tehran’s strategy was to use the mullahs’ connection to the Shiite clergies and population in Iraq that had been built up years before the U.S invasion. The Guards had established Badr brigades that had been expanded into a division with Iraqi recruits during the Iran-Iraq war and had helped Ayatollah Hakim in establishing the Supreme Council for Islamic Revolution in Iraq, currently one of Iraq’s most powerful political parties. Its goal is to put as much pressure on U.S. forces through terror attacks as it can so the U.S. administration won’t think of expanding the Iraq war, giving Iran time to accelerate its nuclear research and development. Tehran knows full well it is in a race, and if it is able to perfect the technology, the West will have no choice but to live with a nuclear Iran. It also believes that after the current President Bush, the next U.S. administration (if led by a Democrat) will most likely reduce forces and slowly move out, leaving it for the Iraqis to sort things out, which ultimately will result in Iran’s domination of the region, with catastrophic consequences for the Free World. This has already happened with Hezbollah. Iran armed and trained Hezbollah into a political force in Lebanon which controls events on the ground, limiting the power of the Lebanese government and even confronting Israel as we saw in the 2006 Lebanon war.

Iran’s current defense minister, Mostafa Najjar, was in charge of the Revolutionary Guards forces in Lebanon that facilitated the attack on the Marine Corps barracks in Beirut on Oct. 23, 1983, killing 241 U.S. servicemen with the largest non-nuclear bomb in history. The current deputy defense minister, Ahmad Vahidi, was the commander of the Quds Forces and the chief intelligence officer of the Guards, in charge of the terrorist activities outside of Iran. He had received authorization for taking the fight to the U.S forces and Israel’s interests around the world directly from Imam Khomeini, the supreme leader at the time. The operations in Lebanon were coordinated by these two men.

Four years after that bombing, Iran’s then-minister of the Revolutionary Guards, Mohsen Rafiqdoost, boasted that, “Both the TNT and the ideology, which in one blast sent 400 U.S. officers to hell, were provided by Iran.” Vahidi is currently on Interpol’s Most Wanted List for the attack on the Jewish community center in Buenos Aires on July 18, 1994. That attack killed 87 and injured more than 100.

There is also strong evidence of the Quds Forces’ involvement in the Khobar Towers bombing in Saudi Arabia that killed 19 U.S. servicemen and wounded 372 more on June 25, 1996. The attack was carried out by the Iranian-backed Saudi Hezbollah, but led back to the leadership in Tehran. In 2001, U.S. Attorney General John Ashcroft said the attack was inspired, supported, and supervised by elements in the Iranian government.

The most radical Islamists control the government in Iran. The Revolutionary Guards’ reach is all-encompassing: they control the vital industries in Iran, serve as ministers in President Mahmoud Ahmadinejad’s cabinet, are members of the Parliament, control events in Iraq, Lebanon and the Palestinian Territory through their Quds Force, and expand their terror network throughout the world, all the while making inroads in nuclear enrichment and missile-delivery technology.

It is not an exaggeration to claim that the radicals belonging to the secretive society called “Hojjatieh,” who are devoted to the 12th Imam, have taken control of all vital positions in Iran. Ayatollah Janati, the head of the Guardian Council in charge of interpreting the constitution, supervising elections, and approving of candidates running for public office, has been very vocal about his opposition to the West: “We are anti-American and we are America’s enemy,” and “Non-Muslims are animals roaming the planet.” They believe that the 12th Imam supports their agenda of obtaining nuclear weapons and destroying Israel in order to start the chaos necessary for the final destruction of what they see as American imperialism and Israeli Zionism.

The Revolutionary Guards, with the help of North Korea, are making advancements in their ballistic missile program by expanding the reach of its Shahab missiles and the successful launch of its long range Kavoshgar 1 missile on February 4, 2008. These missiles are capable of reaching Europe. At the same time, they are moving full speed ahead with their nuclear enrichment activity by installing the new IR-2 centrifuges which can enrich uranium at a faster speed than the P1 model. Iran has installed 3,000 P1 centrifuges with the goal of expanding that number to 50,000 within five years. It is estimated that it will take 1,200 of the new centrifuges to produce enough material for one nuclear weapon in one year as opposed to 3000 units of the P1 model that does the same job. The Guards always believed in a dual process in their operations for their military projects, so if one failed or was sabotaged, the other would carry on. They are doing just that. There is word that in the mountainous region of Mazandaran province, in the north of Iran, the Guards are pursuing nuclear arms underground.

Mostafa Najjar, the current defense minister, is overseeing the enrichment process and the missile-delivery advancements, and his deputy, Ahmad Vahidi, is overseeing the proliferation of arms and missiles to terrorist groups such as Hezbollah and Hamas in coordination with Syria.

Today, trying to fool the world, the current supreme leader, Ayatollah Khamenei, has publicly declared that pursuit and acquisition of atomic bombs are against Islam. But it was Khamenei himself, along with Hashemi Rafsanjani, Rezaei, and others in the leadership, who ordered the start of research and development of nuclear technology in the mid-80s.

Khamenei put out a statement to the world in 2008 that God would punish Iranians if they did not support the country’s disputed nuclear program, and any stop in the continuation of the nuclear work would be against God’s will. Ahmadinejad, in a recent 2008 speech, told the audience that the “enemy” (referring to the U.S. and Israel) and their superficial power are on a path to destruction, and that the countdown to their total destruction has begun.

The rulers in Iran believe it is their duty to prepare the circumstances for the reappearance of the 12th Imam. “Our Revolution’s main mission is to pave the way for the reappearance of the 12th Imam, Imam Mahdi,” Ahmadinejad said during a speech in 2005 to leaders from across the country. Shiites believe the reappearance of the 12th Imam will bring justice and peace to the world by establishing Islam throughout the world. They believe he will reappear when the world has fallen into chaos. It is believed the chaos will start in Afghanistan and then move into Iraq, where there will be blood and destruction everywhere (already in the works) and from there to the world with burning dark clouds (nuclear war). The 12th Imam will then come to destroy the “Dajjal,” the False Messiah, free the world from oppression and aggression, and then bring justice where it will be heaven on earth for many years to come. It is said Jesus will reappear at the same time and fight alongside Mahdi.

Members of the Iranian leadership say they have a “signed contract” with the 12th Imam and are doggedly pursuing nuclear weapons to bring on that catastrophe. Iran’s president, Ahmadinejad, has said that Israel must be destroyed (2005 “World without Zionism” speech, “Israel must be wiped off the map”). This is no idle threat.

If the mullahs’ true intention is to provide electricity through nuclear energy for the Iranians (which they claim) — the same Iranians whose women, students, teachers, writers and union workers are being flogged, beaten, tortured and stoned to death, the same Iranians who are denied a free election or freedom of speech — then why wouldn’t they accept the comprehensive incentive package offered by the world leaders in full, scrap the enrichment process, and bring peace and prosperity to their nation?

The reason is that their belief in Islam’s conquest of the world through the coming of the 12th Imam mandates their actions, and — just as a suicide bomber — they are not even interested in their own survival and cannot be diverted from their chosen path. The question is: Can the world afford to sit idly by and wait for Armageddon?

MR. SIMON: This is Roger Simon for Pajamas Media and I am here with Reza Khalili. Khalili is not the gentleman’s real name, he is a former CIA agent who infiltrated the

Revolutionary Guard of Iran. This may be a first on the radio or on the internet to reveal a former CIA agent to infiltrate that organization. Welcome to Pajamas Media, Mr. Khalili.

MR. KHALILI: Thank you.

MR. SIMON: How long did you work for the CIA?

MR. KHALILI: Well one thing is, Roger, I can’t be specific on the time, location, so forth and so on, to protect my identify but I’ll give you an estimate which was from the ’80s through the ’90s.

MR. SIMON: And you worked as a member of the Revolutionary Guard?

MR. KHALILI: I was, and I was working as a member of the Revolutionary Guard, yes.

MR. SIMON: And how did you come to work with the CIA?

MR. KHALILI: I went to Iran after the revolution since I had my education here in the United States, and I went with the hope that things are going to move along on — on a freedom for all political parties and so forth and so on. But what I witnessed was killings of the opposition, torture of the opposition, radical idea taking place in Iran forcing Iranian people, ordinary citizens to give into very restricted laws of Islam.

As the time went along, I became totally disgusted and I lost some good friends to the revolution, I had people dear to me die in the revolution and I basically took it upon myself to take action and make a difference. So I flew back to the US. Actually, I got the hope of the Revolutionary Guard to facilitate my trip. I made up some story which was partly true and flew to US, contacted the FBI, got in touch with the CIA and went through training and then back to Iran to the Revolutionary Guard, starting my new job as a CIA agent.

MR. SIMON: Had you joined the Revolutionary Guard before you came back to the US?

MR. KHALIL: Yes. I was in the Revolutionary Guard before I came in the US, yes.

MR. SIMON: Are there other members of the Revolutionary Guard who are US agents.

MR. SIMON: Reza Khalili is going to be doing a series of interviews, many on video — disguised video of course — for Pajamas Media, in which we will get into a great deal of detail on the workings of the Revolutionary Guard and so forth.

But let us turn now to an article, the first article that Mr. Khalili has done for Pajamas Media, which is appearing now and has a very sensational charge right at the top, a very controversial charge, that Iran was behind the Lockerbie disaster.

Now, this has usually been ascribed to Gaddafi and the Libyans. How are you sure that this is an Iranian caused event?

MR. KHALILI: Well, right after the disaster in the Persian Gulf, the US war ship shot down an Iranian civilian jet which caused, you know, more than 290 people were killed in that incident. That coincided with an ultimatum from President Reagan to the leadership of Iran to accept peace with Iraq. That ultimatum was very powerful, very — it was in the lines that if you do not accept peace, we’re going to come all out on you.

So the Libyans got together with Khomeini — Rafsanjani, Khomeini and the rest and they decided it was time to accept piece. And both Rafsanjani at that time, and the others in the leadership, promised the

Revolutionary Guard that they’re going to take revenge for the shooting down of the Iranian airliner. That was — I heard that from my sources within the Revolutionary Guard — that they were going to take revenge and hit a blow to the U.S. interest.

Now, shortly after that — shortly after the Pan Am incident I was in Europe on a mission and I had met with Iranian agents somewhere in Europe. I knew specifically who they were tied to and how high up they were connected. And it was right after the Pan Am bombing. We talked about the incident, they verified that Rafsanjani had ordered the Pan Am bombing and the retaliation for the Iranian airliner incident and they talked about a Palestinian suspect and the transistor — that the bomb was in the transistor radio. And then went on and talked about some of the investigation of one of the European governments that was in the process and which was not publicly available to people.

In my conversation with them I was convinced that this was an Iranian act. It was delivered, as promised, through their proxies. I reported my findings to the CIA, gave the names of the agents. They were traced — their travels were traced; where they were before, what countries they had visited. I told them of their connection to the Iranian hierarchy and so that’s where we left it off.

I expected a follow-up; nothing happened because six, seven months after Rafsanjani became the president Khomeini had died. Khamenei became the new supreme leader and CIA and US — the new US administration, President Bush Senior, made an assessment that

Hashimi Rafsanjani, the new president, is ready for a change in diplomatic relations as Rafsanjani had sent signals to the new US administration, as they always do they’re the master of deception.

So they changed their policies. They had traded my vision and opinion under Iranian government that they can never be trusted. Each one of them are a terrorist, and I’m not exaggerating. Everyone one of them have blood on their hand, either an American, Israeli or Persian.

So I was a foot soldier. I was somebody at the front lines reporting the facts and my opinion. Obviously they have their own analysts and organization that comes up with these opinions that they thought Rafsanjani was going to be a new leader and they told me, specifically, that Rafsanjani — consider Rafsanjani as the new king of Iran.

Well, about a year later they came to the conclusion that they were duped into such relations and they asked me to look for an Iranian who would testify that Iran was making a nuclear bomb at that time. Now I’m talking about early ’90s. That goes to show that the CIA And the US government knew that Iran was working on a nuclear bomb. I had reported in the mid ’80s that they were going to do that. They had come to a conclusion to do that because Saddam was looking for a nuclear bomb and technology during the war and as always, their policies of negotiation and trusting the Iranian leadership was false and hence the result and where we are right now.

MR. SIMON: Now, let me ask you a question about this. Does this mean that you think that the Iranian were working with Gaddafi on some level?

MR. KHALILI: Well, if — there was an article published June 2007, it was by Judd Scotland on Sunday and the evidence that the investigation was steered away from pointing to Iran and some of the evidence was actually interfered with to point to the defendant. Now, I don’t know who did it, as far as the specific person, but I know that Iran controls, and has under its command, several proxies throughout the world and they’ve shown that over and over again with the Beirut bombing, with the Khobar bombing, with the Pan Am bombing. In the ’90s they did a suicide bombing in Argentina on the Jewish community.

Some of the leaders, the current people in the Iranian government, are on Interpol’s most wanted. The Argentinean judge has an arrest warrant on Rafsanjani and several others; Rezai, Ahmad Vahidi, Velayati, Fallahian the minister of intelligence at that time.

The German prosecutor has arrest warrants for several of them. They are under arrest warrants by the three — they have done many, many assassinations and terrorist activities that are all streamed through the Foreign Ministry, the Ministry of Intelligence and the leadership in charge. And that’s the case right now. They’re still there. They’re still working the government with one goal in mind.

MR. SIMON: Reza Khalili, I am going to ask you a question that relates to the current presidential campaign in the United States because John McCain came under a certain amount of fire, supposedly for confusing Shiah’s and Shiites and Iran. In this fire they said that Iranian Shiahs would not work with Sunnis, do you think this is true?

MR. KHALILI: Well, it’s important to state that the Iranian government has been working with the Iraqi courts. That happened all along the Iran/Iraq war. Even though they did not share same ideology, the Iraqi courts and the Iranians were hand in hand to topple Saddam. They’ve been working with the Ba’athist regime of Syria since the revolution.

MR. SIMON: Who are Sunnis, of course, yes.

MR. KHALILI: Right. So they’ve been helping the Syrians and they’ve been expanding their power in the Middle East through the joint cooperation with the Syrians. Also the Taliban, their sworn enemy, they’ve been helping them in the uprising, after the invasion of Afghanistan, to counter attack the neutral forces and keep the pressure on the Americans.

They’ve got a long history with working with the leftist, with every terrorist group that they can to promote their agenda.

MR. SIMON: What about working with the biggest Sunni of all, Al Qaeda, do you think they’ve worked with Al Qaeda?

MR. KHALILI: Well, Ahmad Vahidi, the current deputy of the Defense Department. And he used to be the head of the Qods forces. He had — he’s had new things with Al Qaeda. He’s had contacts with Al Qaeda and they — of course they do share common goals but the enemy of my enemy is my best friend. Then, you know, that applies. They’ve had contact, they’ve helped and they have facilitated every different group as long as it promotes their agenda.

MR. SIMON: Well, thank you very much, Reza Khalili, for talking with Pajamas Media. We look forward to talking with you soon on podcast and in video form. Thank you very much.

The Geopolitics of Iran: Holding the Center of a Mountain FortressStratfor Today » July 14, 2008 | 1007 GMT

Editor’s Note: This is the third in a series of monographs by Stratfor founder George Friedman on the geopolitics of countries that are currently critical in world affairs. Click here for a printable PDF of the monograph in its entirety.

By George Friedman

To understand Iran, you must begin by understanding how large it is. Iran is the 17th largest country in world. It measures 1,684,000 square kilometers. That means that its territory is larger than the combined territories of France, Germany, the Netherlands, Belgium, Spain and Portugal — Western Europe. Iran is the 16th most populous country in the world, with about 70 million people. Its population is larger than the populations of either France or the United Kingdom.

Under the current circumstances, it might be useful to benchmark Iran against Iraq or Afghanistan. Iraq is 433,000 square kilometers, with about 25 million people, so Iran is roughly four times as large and three times as populous. Afghanistan is about 652,000 square kilometers, with a population of about 30 million. One way to look at it is that Iran is 68 percent larger than Iraq and Afghanistan combined, with 40 percent more population.

More important are its topographical barriers. Iran is defined, above all, by its mountains, which form its frontiers, enfold its cities and describe its historical heartland. To understand Iran, you must understand not only how large it is but also how mountainous it is.

Iran’s most important mountains are the Zagros. They are a southern extension of the Caucasus, running about 900 miles from the northwestern border of Iran, which adjoins Turkey and Armenia, southeast toward Bandar Abbas on the Strait of Hormuz. The first 150 miles of Iran’s western border is shared with Turkey. It is intensely mountainous on both sides. South of Turkey, the mountains on the western side of the border begin to diminish until they disappear altogether on the Iraqi side. From this point onward, south of the Kurdish regions, the land on the Iraqi side is increasingly flat, part of the Tigris-Euphrates basin. The Iranian side of the border is mountainous, beginning just a few miles east of the border. Iran has a mountainous border with Turkey, but mountains face a flat plain along the Iraq border. This is the historical frontier between Persia — the name of Iran until the early 20th century — and Mesopotamia (“land between two rivers”), as southern Iraq is called.

The one region of the western border that does not adhere to this model is in the extreme south, in the swamps where the Tigris and Euphrates rivers join to form the Shatt al-Arab waterway. There the Zagros swing southeast, and the southern border between Iran and Iraq zigzags south to the Shatt al-Arab, which flows south 125 miles through flat terrain to the Persian Gulf. To the east is the Iranian province of Khuzestan, populated by ethnic Arabs, not Persians. Given the swampy nature of the ground, it can be easily defended and gives Iran a buffer against any force from the west seeking to move along the coastal plain of Iran on the Persian Gulf.

Running east along the Caspian Sea are the Elburz Mountains, which serve as a mountain bridge between the Caucasus-Zagros range and Afghan mountains that eventually culminate in the Hindu Kush. The Elburz run along the southern coast of the Caspian to the Afghan border, buffering the Karakum Desert in Turkmenistan. Mountains of lesser elevations then swing down along the Afghan and Pakistani borders, almost to the Arabian Sea.

Iran has about 800 miles of coastline, roughly half along the eastern shore of the Persian Gulf, the rest along the Gulf of Oman. Its most important port, Bandar Abbas, is located on the Strait of Hormuz. There are no equivalent ports along the Gulf of Oman, and the Strait of Hormuz is extremely vulnerable to interdiction. Therefore, Iran is not a major maritime or naval power. It is and always has been a land power.

The center of Iran consists of two desert plateaus that are virtually uninhabited and uninhabitable. These are the Dasht-e Kavir, which stretches from Qom in the northwest nearly to the Afghan border, and the Dasht-e Lut, which extends south to Balochistan. The Dasht-e Kavir consists of a layer of salt covering thick mud, and it is easy to break through the salt layer and drown in the mud. It is one of the most miserable places on earth.

Iran’s population is concentrated in its mountains, not in its lowlands, as with other countries. That’s because its lowlands, with the exception of the southwest and the southeast (regions populated by non-Persians), are uninhabitable. Iran is a nation of 70 million mountain dwellers. Even its biggest city, Tehran, is in the foothills of towering mountains. Its population is in a belt stretching through the Zagros and Elbroz mountains on a line running from the eastern shore of the Caspian to the Strait of Hormuz. There is a secondary concentration of people to the northeast, centered on Mashhad. The rest of the country is lightly inhabited and almost impassable because of the salt-mud flats.

If you look carefully at a map of Iran, you can see that the western part of thecountry — the Zagros Mountains — is actually a land bridge for southern Asia. It is the only path between the Persian Gulf in the south and the Caspian Sea in the north. Iran is the route connecting the Indian subcontinent to the Mediterranean Sea. But because of its size and geography, Iran is not a country that can be easily traversed, much less conquered.

The location of Iran’s oil fields is critical here, since oil remains its most important and most strategic export. Oil is to be found in three locations: The southwest is the major region, with lesser deposits along the Iraqi border in the north and one near Qom. The southwestern oil fields are an extension of the geological formation that created the oil fields in the Kurdish region of northern Iraq. Hence, the region east of the Shatt al-Arab is of critical importance to Iran. Iran has the third largest oil reserves in the world and is the world’s fourth largest producer. Therefore, one would expect it to be one of the wealthiest countries in the world. It isn’t.

Iran has the 28th largest economy in the world but ranks only 71st in per capita gross domestic product (as expressed in purchasing power). It ranks with countries like Belarus or Panama. Part of the reason is inefficiencies in the Iranian oil industry, the result of government policies. But there is a deeper geographic problem. Iran has a huge population mostly located in rugged mountains. Mountainous regions are rarely prosperous. The cost of transportation makes the development of industry difficult. Sparsely populated mountain regions are generally poor. Heavily populated mountain regions, when they exist, are much poorer.

Iran’s geography and large population make substantial improvements in its economic life difficult. Unlike underpopulated and less geographically challenged countries such as Saudi Arabia and Kuwait, Iran cannot enjoy any shift in the underlying weakness of its economy brought on by higher oil prices and more production. The absence of inhabitable plains means that any industrial plant must develop in regions where the cost of infrastructure tends to undermine the benefits. Oil keeps Iran from sinking even deeper, but it alone cannot catapult Iran out of its condition.

The Broad OutlineIran is a fortress. Surrounded on three sides by mountains and on the fourth by the ocean, with a wasteland at its center, Iran is extremely difficult to conquer. This was achieved once by the Mongols, who entered the country from the northeast. The Ottomans penetrated the Zagros Mountains and went northeast as far as the Caspian but made no attempt to move into the Persian heartland.

Iran is a mountainous country looking for inhabitable plains. There are none to the north, only more mountains and desert, or to the east, where Afghanistan’s infrastructure is no more inviting. To the south there is only ocean. What plains there are in the region lie to the west, in modern-day Iraq and historical Mesopotamia and Babylon. If Iran could dominate these plains, and combine them with its own population, they would be the foundation of Iranian power.

Indeed, these plains were the foundation of the Persian Empire. The Persians originated in the Zagros Mountains as a warrior people. They built an empire by conquering the plains in the Tigris and Euphrates basin. They did this slowly, over an extended period at a time when there were no demarcated borders and they faced little resistance to the west. While it was difficult for a lowland people to attack through mountains, it was easier for a mountain-based people to descend to the plains. This combination of population and fertile plains allowed the Persians to expand.

Iran’s attacking north or northwest into the Caucasus is impossible in force. The Russians, Turks and Iranians all ground to a halt along the current line in the 19th century; the country is so rugged that movement could be measured in yards rather than miles. Iran could attack northeast into Turkmenistan, but the land there is flat and brutal desert. The Iranians could move east into Afghanistan, but this would involve more mountain fighting for land of equally questionable value. Attacking west, into the Tigris and Euphrates river basin, and then moving to the Mediterranean, would seem doable. This was the path the Persians took when they created their empire and pushed all the way to Greece and Egypt.

In terms of expansion, the problem for Iran is its mountains. They are as effective a container as they are a defensive bulwark. Supporting an attacking force requires logistics, and pushing supplies through the Zagros in any great numbers is impossible. Unless the Persians can occupy and exploit Iraq, further expansion is impossible. In order to exploit Iraq, Iran needs a high degree of active cooperation from Iraqis. Otherwise, rather than converting Iraq’s wealth into political and military power, the Iranians would succeed only in being bogged down in pacifying the Iraqis.

In order to move west, Iran would require the active cooperation of conquered nations. Any offensive will break down because of the challenges posed by the mountains in moving supplies. This is why the Persians created the type of empire they did. They allowed conquered nations a great deal of autonomy, respected their culture and made certain that these nations benefited from the Persian imperial system. Once they left the Zagros, the Persians could not afford to pacify an empire. They needed the wealth at minimal cost. And this has been the limit on Persian/Iranian power ever since. Recreating a relationship with the inhabitants of the Tigris and Euphrates basin — today’s Iraq — is enormously difficult. Indeed, throughout most of history, the domination of the plains by Iran has been impossible. Other imperial powers — Alexandrian Greece, Rome, the Byzantines, Ottomans, British and Americans — have either seized the plains themselves or used them as a neutral buffer against the Persians.

Underlying the external problems of Iran is a severe internal problem. Mountains allow nations to protect themselves. Completely eradicating a culture is difficult. Therefore, most mountain regions of the world contain large numbers of national and ethnic groups that retain their own characteristics. This is commonplace in all mountainous regions. These groups resist absorption and annihilation. Although a Muslim state with a population that is 55 to 60 percent ethnically Persian, Iran is divided into a large number of ethnic groups. It is also divided between the vastly dominant Shia and the minority Sunnis, who are clustered in three areas of the country — the northeast, the northwest and the southeast. Any foreign power interested in Iran will use these ethnoreligious groups to create allies in Iran to undermine the power of the central government.

Thus, any Persian or Iranian government has as its first and primary strategic interest maintaining the internal integrity of the country against separatist groups. It is inevitable, therefore, for Iran to have a highly centralized government with an extremely strong security apparatus. For many countries, holding together its ethnic groups is important. For Iran it is essential because it has no room to retreat from its current lines and instability could undermine its entire security structure. Therefore, the Iranian central government will always face the problem of internal cohesion and will use its army and security forces for that purpose before any other.

Geopolitical ImperativesFor most countries, the first geographical imperative is to maintain internal cohesion. For Iran, it is to maintain secure borders, then secure the country internally. Without secure borders, Iran would be vulnerable to foreign powers that would continually try to manipulate its internal dynamics, destabilize its ruling regime and then exploit the resulting openings. Iran must first define the container and then control what it contains. Therefore, Iran’s geopolitical imperatives:

1. Control the Zagros and Elburz mountains. These constitute the Iranian heartland and the buffers against attacks from the west and north.

2. Control the mountains to the east of the Dasht-e Kavir and Dasht-e Lut, from Mashhad to Zahedan to the Makran coast, protecting Iran’s eastern frontiers with Pakistan and Afghanistan. Maintain a line as deep and as far north and west as possible in the Caucasus to limit Turkish and Russian threats. These are the secondary lines.

3. Secure a line on the Shatt al-Arab in order to protect the western coast of Iran on the Persian Gulf.

4. Control the divergent ethnic and religious elements in this box.

5. Protect the frontiers against potential threats, particularly major powers from outside the region.

Iran has achieved four of the five basic goals. It has created secure frontiers and is in control of the population inside the country. The greatest threat against Iran is the one it has faced since Alexander the Great — that posed by major powers outside the region. Historically, before deep-water navigation, Iran was the direct path to India for any Western power. In modern times, the Zagros remain the eastern anchor of Turkish power. Northern Iran blocks Russian expansion. And, of course, Iranian oil reserves make Iran attractive to contemporary great powers.

There are two traditional paths into Iran. The northeastern region is vulnerable to Central Asian powers while the western approach is the most-often used (or attempted). A direct assault through the Zagros Mountains is not feasible, as Saddam Hussein discovered in 1980. However, manipulating the ethnic groups inside Iran is possible. The British, for example, based in Iraq, were able to manipulate internal political divisions in Iran, as did the Soviets, to the point that Iran virtually lost its national sovereignty during World War II.

The greatest threat to Iran in recent centuries has been a foreign power dominating Iraq —Ottoman or British — and extending its power eastward not through main force but through subversion and political manipulation. The view of the contemporary Iranian government toward the United States is that, during the 1950s, it assumed Britain’s role of using its position in Iraq to manipulate Iranian politics and elevate the shah to power.

The 1980-1988 war between Iran and Iraq was a terrific collision of two states, causing several million casualties on both sides. It also demonstrated two realities. The first is that a determined, well-funded, no-holds-barred assault from Mesopotamia against the Zagros Mountains will fail (albeit at an atrocious cost to the defender). The second is that, in the nation-state era, with fixed borders and standing armies, the logistical challenges posed by the Zagros make a major attack from Iran into Iraq equally impossible. There is a stalemate on that front. Nevertheless, from the Iranian point of view, the primary danger of Iraq is not direct attack but subversion. It is not only Iraq that worries them. Historically, Iranians also have been concerned about Russian manipulation and manipulation by the British and Russians through Afghanistan.

The Current SituationFor the Iranians, the current situation has posed a dangerous scenario similar to what they faced from the British early in the 20th century. The United States has occupied, or at least placed substantial forces, to the east and the west of Iran, in Afghanistan and Iraq. Iran is not concerned about these troops invading Iran. That is not a military possibility. Iran’s concern is that the United States will use these positions as platforms to foment ethnic dissent in Iran.

Indeed, the United States has tried to do this in several regions. In the southeast, in Balochistan, the Americans have supported separatist movements. It has also done this among the Arabs of Khuzestan, at the northern end of the Persian Gulf. And it has tried to manipulate the Kurds in northwestern Iran. (There is some evidence to suggest that the United States has used Azerbaijan as a launchpad to foment dissent among the Iranian Azeris in the northwestern part of the country.)

The Iranian counter to all this has several dimensions:

1. Maintain an extremely powerful and repressive security capability to counter these moves. In particular, focus on deflecting any intrusions in the Khuzestan region, which is not only the most physically vulnerable part of Iran but also where much of Iran’s oil reserves are located. This explains clashes such as the seizure of British sailors and constant reports of U.S. special operations teams in the region.

2. Manipulate ethnic and religious tensions in Iraq and Afghanistan to undermine the American positions there and divert American attention to defensive rather than offensive goals.

3. Maintain a military force capable of protecting the surrounding mountains so that major American forces cannot penetrate.

4. Move to create a nuclear force, very publicly, in order to deter attack in the long run and to give Iran a bargaining chip for negotiations in the short term.

The heart of Iranian strategy is as it has always been, to use the mountains as a fortress. So long as it is anchored in those mountains, it cannot be invaded. Alexander succeeded and the Ottomans had limited success (little more than breaching the Zagros), but even the Romans and British did not go so far as to try to use main force in the region. Invading and occupying Iran is not an option.

For Iran, its ultimate problem is internal tensions. But even these are under control, primarily because of Iran’s security system. Ever since the founding of the Persian Empire, the one thing that Iranians have been superb at is creating systems that both benefit other ethnic groups and punish them if they stray. That same mindset functions in Iran today in the powerful Ministry of Intelligence and Security and the elite Islamic Revolutionary Guards Corps (IRGC). (The Iranian military is configured mainly as an infantry force, with the regular army and IRGC ground forces together totaling about 450,000 troops, larger than all other service branches combined.)

Iran is, therefore, a self-contained entity. It is relatively poor, but it has superbly defensible borders and a disciplined central government with an excellent intelligence and internal security apparatus. Iran uses these same strengths to destabilize the American position (or that of any extraregional power) around it. Indeed, Iran is sufficiently secure that the positions of surrounding countries are more precarious than that of Iran. Iran is superb at low-cost, low-risk power projection using its covert capabilities. It is even better at blocking those of others. So long as the mountains are in Iranian hands, and the internal situation is controlled, Iran is a stable state, but one able to pose only a limited external threat.

The creation of an Iranian nuclear program serves two functions. First, if successful, it further deters external threats. Second, simply having the program enhances Iranian power. Since the consequences of a strike against these facilities are uncertain and raise the possibility of Iranian attempts at interdiction of oil from the Persian Gulf, the strategic risk to the attacker’s economy discourages attack. The diplomatic route of trading the program for regional safety and power becomes more attractive than an attack against a potential threat in a country with a potent potential counter.

Iran is secure from conceivable invasion. It enhances this security by using two tactics. First, it creates uncertainty as to whether it has an offensive nuclear capability. Second, it projects a carefully honed image of ideological extremism that makes it appear unpredictable. It makes itself appear threatening and unstable. Paradoxically, this increases the caution used in dealing with it because the main option, an air attack, has historically been ineffective without a follow-on ground attack. If just nuclear facilities are attacked and the attack fails, Iranian reaction is unpredictable and potentially disproportionate. Iranian posturing enhances the uncertainty. The threat of an air attack is deterred by Iran’s threat of an attack against sea-lanes. Such attacks would not be effective, but even a low-probability disruption of the world’s oil supply is a risk not worth taking.

As always, the Persians face a major power prowling at the edges of their mountains. The mountains will protect them from main force but not from the threat of destabilization. Therefore, the Persians bind their nation together through a combination of political accommodation and repression. The major power will eventually leave. Persia will remain so long as its mountains stand.

Iran Has Earned NothingJuly 22, 2008; Page A18In its waning days, the Bush Administration seems to be veering toward a policy of détente with Iran. Recent moves include a face-to-face meeting with Iran over its nuclear program and the likelihood of reopening a diplomatic mission in Tehran for the first time since -- well, you remember. Iran responded to these gestures on the weekend by rebuffing the West's latest set of carrots while refusing once again to give up its uranium enrichment.

What precisely did Iran do to deserve the warm shoulder? Now as ever, Tehran underwrites and arms terrorist proxies in Lebanon, Syria, Iraq and Gaza, and calls for Israel's destruction. Earlier this month, it tested long-range missiles capable of reaching southern Europe. As for getting that bomb, Iran has made steady progress this decade, enriching uranium in increasingly sophisticated centrifuges in violation of three U.N. Security Council resolutions.

The State Department is playing down any shift in its approach toward Iran. William Burns, the third most senior U.S. diplomat, merely sat in on the latest round of talks this weekend between the 5+1 group -- the permanent Security Council members and Germany -- and Iran's chief negotiator, Saeed Jailili. And yesterday, Secretary of State Condoleezza Rice, possibly trying to rebalance the latest tilt, threatened a return to sanctions absent a "serious answer" from Iran on giving up its enrichment program.

As for the establishment of a U.S. Interests Section in Tehran, State Department spokesman Sean McCormack on Thursday wouldn't say when a decision might be taken, adding, "We want to have people-to-people contact with the Iranian people." News reports claim the decision is all but made, pending approval by the Iranians.

Diplomacy has its uses, and the U.S. can do more to support the Iranian peoples' struggle to shake off their oppressive theocracy. Just how a U.S. Interests Section would achieve that is another question: The Iranian government maintains a tight grip on what foreign embassies can or cannot do, as British diplomats have learned after twice coming under attack the past three years.

But diplomacy also means getting something for giving something. That's not how it has worked here. Mr. Bush has conceded Iran's supposed "right" to build nuclear reactors, despite the fact that Tehran forfeited that right when the U.N. found it to be in material breach of the Nuclear Nonproliferation Treaty. Mr. Bush has also offered to negotiate directly with Tehran on the sole condition -- the only "precondition," as Barack Obama refers to it -- that Iran stop enriching uranium. Yet Iran continues to enrich.

The Iranians understand that the fondest wish of America's foreign policy establishment is to strike what is often called a "grand bargain" that would lead to the normalization of relations between the two states. We would not be opposed to such a bargain, provided it required Iran to verifiably abandon all its nuclear programs, including the so-called civilian ones; stop supplying arms to militias that are killing our soldiers in Iraq; end its support for terrorist groups and hand over the suspects in the 1996 Khobar Towers bombings, in which 19 U.S. servicemen died.

Instead, Iran is having it both ways, behaving like a rogue state even as it is increasingly accorded the respect due a normal one. We understand that the U.S. has had diplomatic relations with other rotten regimes. But so long as U.S. diplomatic recognition of Iran remains a carrot in any negotiations with them, what's the point of surrendering it by stages now?

That's a question some of our friends in the neighborhood are asking themselves. We know from talks with Iraqis that they wonder what price they might pay for our accommodation of their ambitious, meddling neighbor. We know from our Israeli friends, too, that they sense the accommodationist drift of our Iran policy and are drawing conclusions of their own. Unlike the Bush Administration in its legacy-hunting days, inconstancy is not a policy option they can afford.

Although I fear it to be wrong, as I have been sharing here for some time now, Stratfor has not feared to go its own way with its analysis:

================

Geopolitical Diary: The Solid Footing of U.S.-Iranian NegotiationsJuly 21, 2008 | 2336 GMTAfter a weekend of heated political haggling in Geneva between the United States and Iran over the latter’s nuclear program, U.S. Secretary of State Condoleezza Rice had some tough words for Iran on Monday. Speaking from Abu Dhabi, Rice basically said that Iran needs to quit stalling, get serious about these negotiations and suspend uranium enrichment or else face another round of hard-hitting sanctions in two weeks. She added that the United States has already done enough to demonstrate that it is serious about these talks, casting doubt on whether Washington would again send a U.S. diplomat to the next meeting in Geneva to hear Iran’s response.

From Washington’s point of view, the U.S. government has already taken a number of concrete steps to create a political atmosphere conducive to negotiating with the Iranians. In the lead-up to the Geneva meeting, the United States floated the idea of setting up a diplomatic office in Tehran, backed away from its demand for Iran to suspend uranium enrichment in the “pre-negotiation” phase, delayed negotiations with the Iraqi government on keeping a long-term U.S. military presence in Iraq and broke with long-standing policy by sending a U.S. diplomat to the meeting in Geneva.

As far as the United States is concerned, it is Iran’s turn to make concessions, beginning with the ever-so-touchy subject of uranium enrichment. But by refusing to budge on suspending uranium enrichment to further the talks, Iran made clear over the weekend that it is not about to be rushed with these negotiations. A number of critics of our analysis on U.S.-Iran negotiations are quick to claim that this is all just a stalling ploy by the Iranians to buy time to advance their nuclear program. That might be the case, but the Iranians don’t exactly have the luxury of stalling for time.

Iran cannot afford a stalemate in Iraq that gives the United States and Saudi Arabia ample time to bolster Iraq’s Sunnis and undercut Iran’s historic chance at consolidating Shiite influence in its Western neighbor. Moreover, the Iranians remember well the value of sorting out the tough issues with a weak U.S. administration in an election year rather than starting from scratch with a new and unpredictable government carrying a fresh political mandate come November. To this end, Ali Akbar Hashemi Rafsanjani, a highly influential figure in the Iranian leadership, has stressed in recent interviews how Iran must learn from its past and not write off the war threats from Israel and the United States. Rafsanjani has drawn parallels between the current threat environment and the situation Iran faced during the Iran-Iraq War of the 1980s, when the country was hit hard by a U.S.-backed Iraqi regime.

The hard part for both Iran and the United States comes now, and Iran is facing a strict timetable to sort out the nuclear issue and get a fair deal on Iraq.

But Iran has a very delicate matter on its hands. After decades of pursuing a foreign policy built on hostility toward the United States, Iran now needs to convince its public that now is a good idea to talk to the Great Satan. Likewise, the United States needs to demonstrate that it’s politically acceptable to talk to a member of the Axis of Evil. The United States is a bit further along in this public relations campaign. After the Baker-Hamilton Iraq Study Group report was released back in December 2006, the U.S. public warmed up to the idea of holding negotiations with Iran. In fact, the political debate has evolved to the point where the bulk of Americans are asking, “why aren’t we talking to the Iranians?”

In Iran, it gets a bit trickier. Living in a relatively closed society and constantly being subjected to stories of Iranian prowess and U.S. cowardice makes for a difficult transition. Indeed, there have already been clear signs of a power struggle within Iran’s ruling circles over whether Iran should move forward with these negotiations, with the main concern being how to open up to the West without having the clerics lose control of the regime.

Comforted by the fact that Washington has largely accepted that the clerical regime is here to stay, the pragmatic conservative faction in Iran appears to be winning in this debate with a public relations campaign already in full swing to prepare the Iranian public for a political rapprochement with the United States. The Iranian state-run press has been smothered lately with articles and op-eds discussing the merits of negotiating with the United States. A number of endorsements for this path have come from the senior clerical leadership, notably including Iran’s primary decision-maker, Supreme Leader Ayatollah Ali Khamenei. In fact, Iranian President Mahmoud Ahmadinejad’s vice president in charge of tourism caused quite the stir Monday when he stated “Iran is friends with the American and Israeli people” and that Iran sees “the Americans as one of the best nations in the world” — quite a long way from the traditional Iranian rhetoric of “Death to America”.

We can’t help but notice the uptick in these messages coming from the Iranian leadership. If Iran were simply jerking the Americans and the Europeans around in these negotiations to buy time for a nuclear program that has extremely low chances of developing into a real military threat in the first place, there would be little need to go through the trouble of opening up the public’s mind to re-engaging with the West. And while the U.S.-Iranian political jockeying and military posturing will intensify in the coming weeks, no matter how rocky the road, these negotiations are on solid footing.

For an organisation that prides itself on being a well-run administrative machine, the leadership of Iran’s Revolutionary Guards is having a rather testing time. It’s not just last Saturday’s mysterious explosion in a suburb of Tehran that killed 15 people that is causing the leadership sleepless nights, although the nationwide news black-out imposed immediately afterwards does suggest the Revolutionary Guards, the storm troops of Iran’s Islamic Revolution, are rattled.

Details are only now starting to reach the outside world, and it looks increasingly like sabotage was responsible for devastating a military convoy as it travelled through Khavarshahar. The company responsible for moving the equipment, LTK, is owned by the Revolutionary Guards and is suspected of being involved in shipping arms to Lebanon’s Hizbollah Shia Muslim militia, which is trained and funded by Tehran.

The Revolutionary Guards’ arms shipments to Lebanon and its allies in Iraq, Afghanistan and Somalia are usually shrouded in such secrecy that only a few senior members of President Mahmoud Ahmadinejad’s government are briefed in advance. As the international crisis over Iran’s nuclear programme deepens, the Revolutionary Guards have intensified their efforts to supply regional allies with military hardware so that, in the event of Tehran becoming involved in an armed confrontation with the West, Iran can respond by opening a number of fronts in the Middle East and beyond.

The need to keep the arms build-up secret would explain the Revolutionary Guards’ decision to ban the Iranian media from reporting the explosion, even though it was heard throughout the capital. But what really concerns Iran’s leadership is that the incident is the latest in a long line of unexplained explosions.

In May, officials blamed British and American agents for an explosion at a mosque in Shiraz that had just finished staging an exhibition of Iran’s latest military hardware. Last year more than a dozen Iranian engineers were killed while trying to fit a chemical warhead to a missile in Syria.

A few months earlier, a train reported to be carrying military supplies to Syria was derailed by another mysterious explosion in northern Turkey. It is highly unlikely that these incidents are unrelated, which has only served to deepen the mood of fear and suspicion gripping the Revolutionary Guards’ leadership.

Tensions have been running high in Tehran since Seymour Hersh, the respected American investigative journalist, revealed in the New Yorker magazine last month that President George W Bush had authorised up to $400 million to fund a major escalation in covert operations to destabilise the regime.

Having contended with Iran’s attempts to undermine the Iraqi government over the past five years, British and American military commanders are more than happy to undertake covert operations in Iran, and there have been unconfirmed reports that special forces are operating undercover in the country.

Western diplomats and nuclear inspectors who frequently travel to Tehran as part of the international effort to persuade the Iranians to halt their uranium enrichment activities report that a sense of paranoia appears to have gripped the regime in recent months.“There has certainly been a change of mood since the start of the year,” a Vienna-based official told me this week. “In the past they always appeared very self-confident and sure-footed in their dealings with foreign officials. Now they come across as very suspicious, and watch our every move.”

Tehran’s changed political atmosphere might be explained by the fact that President Ahmadinejad and his senior officials realise they are running out of time in their negotiations with the West. After more than four years of painstaking talks with the Vienna-based International Atomic Energy Agency, Iran is continuing to enrich uranium at its underground facility at Natanz, a clear breach of its obligations under the Nuclear Non-Proliferation Treaty.

Even senior officials at the agency, who have gone out of their way to accommodate the Iranians’ concerns, have little confidence that the Iranians have any intention of reaching a compromise. “All they seem interested in is extending the talks as long as possible while all the time they continue with their uranium enrichment programme,” said an official close to the talks. “Their entire strategy appears to be based on playing for time.”

Iran has just another week to respond to the latest proposal put forward by the West at last weekend’s meeting with Iranian officials in Geneva, in which Iran was offered economic reconstruction in return for halting the enrichment programme.

Iran is intensifying efforts to strengthen the effectiveness of Hizbollah in southern Lebanon in preparation for a possible attack on Israel. Revolutionary Guards are keen to strengthen its leadership following the assassination of Imad Mugniyeh, Hizbollah’s head of security, in the Syrian capital by Israeli agents last February.

Mugniyeh, the terrorist behind suicide truck bomb attacks on American and French troops in the 1980s, played a key role in building up Hizbollah’s military strength, which proved to be highly effective during its 2006 attack against Israeli forces in southern Lebanon. Tehran wants to appoint one of its commanders as a replacement, but has received unexpected resistance from Sheikh Hassan Nasrallah, the secretary-general. Nasrallah insists Mugniyeh’s replacement must come from within Hizbollah’s ranks. Suddenly nothing seems to be going the Revolutionary Guards’ way.

Recent talks the United States held with Iran are aimed at creating legitimacy for a potential attack against Iranian nuclear facilities, defense officials speculated on Sunday as Defense Minister Ehud Barak headed to Washington for talks with senior administration officials.

Barak will travel to Washington and New York and will hold talks with his counterpart Robert Gates, Vice President Dick Cheney, Chairman of the Joint Chiefs Admiral Michael Mullen, Secretary of State Condoleezza Rice and National Security Adviser Stephen Hadley.

Officials said it was likely that President George W. Bush would join the meeting between Barak and Hadley. On Wednesday, Barak will fly to New York for a brief meeting with United Nations Secretary-General Ban-Ki Moon.

Barak's departure to the US came as IDF Chief of General Staff Lt.-Gen. Gabi Ashkenazi returned to Israel on Sunday from a week-long visit to the US as Mullen's guest. Ashkenazi held talks with Cheney, Hadley and other senior officials with a focus on the Iranian nuclear program.

"There is a lot of strategic thinking concerning Iran going on right now but no one has yet to make a decision what to do," said a top IDF officer, involved in the dialogue between Israel and the US. "We are still far away from the point where military officers are poring over maps together planning an operation."

In recent weeks, Mullen has said publicly that he is opposed to military action against Iran which would open a "third front" for the US military which is currently fighting in Iraq and Afghanistan.

Barak's talks in the US come a little over a week after the Bush administration sent its number three diplomat to Geneva to participate in European Union talks with Iran over its nuclear program.

The move led to reports that the US was changing its isolation tactic vis-à-vis Iran but Israeli defense officials speculated Sunday that the move was really a ploy to buy international support in the event that Bush decides to attack Iran in his last months in office.

"This way they will be able to say they tried everything," one official speculated. "This increases America's chances of gaining more public support domestically as well as the support of European nations which are today opposed to military action."

Diplomatic officials have speculated that the Iran-US talks were also connected to the presidential elections.

According to the IDF officer, the frequent meetings between Israel and the US in recent weeks - Mullen was in Israel in June - is a sign of the strong ties between the two countries as well as the mutual interest both take in different regional issues such as Iran, Hizbullah, Hamas and Syria.

This article can also be read at http://www.jpost.com /servlet/Satellite?cid=1215331116435&pagename=JPost%2FJPArticle%2FShowFull

Well, , , maybe , , , but to me it reads like Bush-Rice have drawn yet another line in the sand which will be disrespected as well.=====================stratforIran has become the main thoroughfare for jihadist traffic leaving Iraq for Pakistan’s tribal belt, a state-owned newspaper in Afghanistan said on Sunday. An editorial in the daily Anis described the Shiite Islamic republic as a “tunnel for terrorists” to Waziristan. “The people of Afghanistan can’t remain silent against such Iranian behaviors since this country sends those individuals to Afghanistan who kill and murder Afghans,” Anis said. The paper went on to say that “Iran under present conditions has become as the easiest entry for terrorists from the Middle East to Afghanistan and the [Afghan] government has to blockade this tunnel by whatever means.”

While most of the world’s attention is on the Pakistani factor in the Afghan jihadist insurgency, there is not much focus on Iran’s role in its eastern neighbor — even though the Iranians enjoy a considerable amount of influence (linguistic, ethnic, cultural, financial, etc.) in Afghanistan.

It should not be forgotten that Tehran provided significant cooperation to Washington in the latter’s move to overthrow the Taliban regime in the wake of the 9/11 attacks. But even though it was working with the United States to oust the Taliban from power, Iran reportedly allowed al-Qaeda members fleeing the U.S. air assault on Afghanistan to enter Iran and remain in safe-houses maintained by the country’s elite military force, the Islamic Revolutionary Guards Corps. Many of those said to be protected in Iran were senior al Qaeda leaders such as former al Qaeda military chief Seif al-Adel, its ex-spokesman Suleiman Abu Ghaith and Osama bin Laden’s son Saad bin Laden (all of whom are likely still in Iranian “custody”). The founder of the jihadist movement in Iraq, Abu Musab al-Zarqawi, also reportedly entered Iraq from Iran, where he sought refuge after fleeing the U.S. invasion of Afghanistan in the fall of 2001.

Iran has no love for the Taliban or al-Qaeda. On the contrary, they are bitter sectarian and ideological rivals. This rivalry notwithstanding, Tehran maintains complex relationships with these jihadist actors in order to advance its national security interests. Tehran hopes to be able to use them as bargaining chips in any final settlement with the United States.

But before it reaches that stage, Tehran is still routing and rerouting jihadist traffic to pressure the United States and become a player. In between the two regime changes of 2001 and 2003, it was in Iran’s interest to facilitate jihadist relocation into Iraq to force Washington’s hand. But circumstances have changed drastically since then.

The Iranians know that with the situation in Iraq moving toward a settlement of sorts, U.S. attention is returning to Afghanistan. Tehran thus wants to be able to play a major role there as well, especially at a time when the principal U.S. ally in the Afghan theater, Pakistan, is becoming increasingly unreliable. Therefore, Iran is likely facilitating the flow of jihadists in the opposite direction.

It should be noted that it was only a few days ago that Iranian Vice-President Gholam Reza Aghazadeh (also the head of Iran’s Atomic Energy Organization), in reference to U.S.-Iranian talks on its controversial nuclear issue, said that if substantive negotiations start, “many important problems will be resolved: the problem of a stable Middle East, Afghanistan, Lebanon, Iraq and the problem of the high oil price.”

Washington and its wealthy Arab allies have created a bulwark to contain Tehran’s regional ambitions in the Middle East. But Iran takes comfort from the fact that it can still project power into its western and eastern neighbors. Iranian national security policy concerning Iraq is already in an advanced stage, which means the Persian state will be devoting more of its energies to enhance its standing in Afghanistan — at a time when very high-level back-channel meetings between the Bush administration and Iran’s clerical regime are under way.

Tehran, 29 July (AKI) - Sixteen Iranians who converted from Islam to Christianity were arrested on Tuesday in Malakshahr, on the outskirts of the central Iranian city of Isfahan.

The six women, eight men and two adolescents who were arrested were assisting in a conversion ceremony and baptism of three new members of the church at a private house that had been transformed into an evangelical church.

The owners of the home, an elderly couple, were allegedly beaten up before they were locked up in an unmarked lorry.

In April, 10 Christian converts were arrested in Shiraz.

The official evangelical churches in Isfahan received orders not to allow any Muslims to attend their ceremonies and not to facilitate in any way the conversions.

Iranian law does not stipulate any punishment for those who convert from Islam to other faiths, even if the converts are subject to repression.

A few months ago, the government presented a bill which is currently being discussed in parliament, to include in the penal code the crime of "Ertedad" which is the act of abandoning the Muslim faith.

If the parliament does approve the law, the punishment for abandoning Islam will be the death penalty.

Iran has carried out missile tests for what could be a plan for a nuclear strike on the United States, the head of a national security panel has warned.

In testimony before the House Armed Services Committee and in remarks to a private conference on missile defense over the weekend hosted by the Claremont Institute, Dr. William Graham warned that the U.S. intelligence community “doesn’t have a story” to explain the recent Iranian tests.

One group of tests that troubled Graham, the former White House science adviser under President Ronald Reagan, were successful efforts to launch a Scud missile from a platform in the Caspian Sea.

“They’ve got [test] ranges in Iran which are more than long enough to handle Scud launches and even Shahab-3 launches,” Dr. Graham said. “Why would they be launching from the surface of the Caspian Sea? They obviously have not explained that to us.”

Another troubling group of tests involved Shahab-3 launches where the Iranians "detonated the warhead near apogee, not over the target area where the thing would eventually land, but at altitude,” Graham said. “Why would they do that?”

Graham chairs the Commission to Assess the Threat to the United States from Electromagnetic Pulse (EMP) Attack, a blue-ribbon panel established by Congress in 2001.

The commission examined the Iranian tests “and without too much effort connected the dots,” even though the U.S. intelligence community previously had failed to do so, Graham said.

“The only plausible explanation we can find is that the Iranians are figuring out how to launch a missile from a ship and get it up to altitude and then detonate it,” he said. “And that’s exactly what you would do if you had a nuclear weapon on a Scud or a Shahab-3 or other missile, and you wanted to explode it over the United States.”

The commission warned in a report issued in April that the United States was at risk of a sneak nuclear attack by a rogue nation or a terrorist group designed to take out our nation’s critical infrastructure.

"If even a crude nuclear weapon were detonated anywhere between 40 kilometers to 400 kilometers above the earth, in a split-second it would generate an electro-magnetic pulse [EMP] that would cripple military and civilian communications, power, transportation, water, food, and other infrastructure," the report warned.

While not causing immediate civilian casualties, the near-term impact on U.S. society would dwarf the damage of a direct nuclear strike on a U.S. city.

“The first indication [of such an attack] would be that the power would go out, and some, but not all, the telecommunications would go out. We would not physically feel anything in our bodies,” Graham said.

As electric power, water and gas delivery systems failed, there would be “truly massive traffic jams,” Graham added, since modern automobiles and signaling systems all depend on sophisticated electronics that would be disabled by the EMP wave.

“So you would be walking. You wouldn’t be driving at that point,” Graham said. “And it wouldn’t do any good to call the maintenance or repair people because they wouldn’t be able to get there, even if you could get through to them.”

The food distribution system also would grind to a halt as cold-storage warehouses stockpiling perishables went offline. Even warehouses equipped with backup diesel generators would fail, because “we wouldn’t be able to pump the fuel into the trucks and get the trucks to the warehouses,” Graham said.

The United States “would quickly revert to an early 19th century type of country.” except that we would have 10 times as many people with ten times fewer resources, he said.

“Most of the things we depend upon would be gone, and we would literally be depending on our own assets and those we could reach by walking to them,” Graham said.

America would begin to resemble the 2002 TV series, “Jeremiah,” which depicts a world bereft of law, infrastructure, and memory.

In the TV series, an unspecified virus wipes out the entire adult population of the planet. In an EMP attack, the casualties would be caused by our almost total dependence on technology for everything from food and water, to hospital care.

Within a week or two of the attack, people would start dying, Graham says.

“People in hospitals would be dying faster than that, because they depend on power to stay alive. But then it would go to water, food, civil authority, emergency services. And we would end up with a country with many, many people not surviving the event.”

Asked just how many Americans would die if Iran were to launch the EMP attack it appears to be preparing, Graham gave a chilling reply.

“You have to go back into the 1800s to look at the size of population” that could survive in a nation deprived of mechanized agriculture, transportation, power, water, and communication.

“I’d have to say that 70 to 90 percent of the population would not be sustainable after this kind of attack,” he said.

America would be reduced to a core of around 30 million people — about the number that existed in the decades after America’s independence from Great Britain.

The modern electronic economy would shut down, and America would most likely revert to “an earlier economy based on barter,” the EMP commission’s report on Critical National Infrastructure concluded earlier this year.

In his recent congressional testimony, Graham revealed that Iranian military journals, translated by the CIA at his commission’s request, “explicitly discuss a nuclear EMP attack that would gravely harm the United States.”

Furthermore, if Iran launched its attack from a cargo ship plying the commercial sea lanes off the East coast — a scenario that appears to have been tested during the Caspian Sea tests — U.S. investigators might never determine who was behind the attack. Because of the limits of nuclear forensic technology, it could take months. And to disguise their traces, the Iranians could simply decide to sink the ship that had been used to launch it, Graham said.

Several participants in last weekend’s conference in Dearborn, Mich., hosted by the conservative Claremont Institute argued that Iranian president Mahmoud Ahmadinejad was thinking about an EMP attack when he opined that “a world without America is conceivable.”

In May 2007, then Undersecretary of State John Rood told Congress that the U.S. intelligence community estimates that Iran could develop an ICBM capable of hitting the continental United States by 2015.

But Iran could put a Scud missile on board a cargo ship and launch from the commercial sea lanes off America’s coasts well before then.

The only thing Iran is lacking for an effective EMP attack is a nuclear warhead, and no one knows with any certainty when that will occur. The latest U.S. intelligence estimate states that Iran could acquire the fissile material for a nuclear weapon as early as 2009, or as late as 2015, or possibly later.

Secretary of Defense Donald Rumsfeld first detailed the “Scud-in-a-bucket” threat during a briefing in Huntsville, Ala., on Aug. 18, 2004.

While not explicitly naming Iran, Rumsfeld revealed that “one of the nations in the Middle East had launched a ballistic missile from a cargo vessel. They had taken a short-range, probably Scud missile, put it on a transporter-erector launcher, lowered it in, taken the vessel out into the water, peeled back the top, erected it, fired it, lowered it, and covered it up. And the ship that they used was using a radar and electronic equipment that was no different than 50, 60, 100 other ships operating in the immediate area.”

Iran’s first test of a ship-launched Scud missile occurred in spring 1998, and was mentioned several months later in veiled terms by the Commission to Assess the Ballistic Missile Threat to the United States, a blue-ribbon panel also known as the Rumsfeld Commission.

I was the first reporter to mention the Iran sea-launched missile test in an article appearing in the Washington Times in May 1999.

Intelligence reports on the launch were “well known to the White House but have not been disseminated to the appropriate congressional committees,” I wrote. Such a missile “could be used in a devastating stealth attack against the United States or Israel for which the United States has no known or planned defense.”

Few experts believe that Iran can be deterred from launching such an attack by the threat of massive retaliation against Iran. They point to a December 2001 statement by former Iranian President Ali Akbar Hashemi-Rafsanjani, who mulled the possibility of Israeli retaliation after an Iranian nuclear strike.

“The use of an atomic bomb against Israel would destroy Israel completely, while [the same] against the Islamic only would cause damages. Such a scenario is not inconceivable,” Rafsanjani said at the time.

Rep. Trent Franks, R, Ariz., plans to introduce legislation next week that would require the Pentagon to lay the groundwork for an eventual military strike against Iran, to prevent Iran from acquiring nuclear weapons and EMP capability.

“An EMP attack on America would send us back to the horse and buggy era — without the horse and buggy,” he told the Claremont Institute conference on Saturday. “If you’re a terrorist, this is your ultimate goal, your ultimate asymmetric weapon.”

Noting Iran’s recent sea-launched and mid-flight warhead detonation tests, Rep. Franks concluded, “They could do it — either directly or anonymously by putting some freighter out there on the ocean.”

The only possible deterrent against Iran is the prospect of failure, Dr. Graham and other experts agreed. And the only way the United States could credibly threaten an Iranian missile strike would be to deploy effective national missile defenses.

“It’s well known that people don’t go on a diet until they’ve had a heart attack,” said Claremont Institute president Brian T. Kennedy. “And we as a nation are having a heart attack” when it comes to the threat of an EMP attack from Iran.

“As of today, we have no defense against such an attack. We need space-based missile defenses to protect against an EMP attack,” he told Newsmax.

Rep. Franks said he remains surprised at how partisan the subject of space-based missile defenses remain. “Nuclear missiles don’t discriminate on party lines when they land,” he said.

Arizona Republican Sen. Jon Kyl, a long-standing champion of missile defense, told the Claremont conference on Friday that Sen. Obama has opposed missile defense tooth and nail and as president would cut funding for these programs dramatically.

“Senator Obama has been quoted as saying, ‘I don’t agree with a missile defense system,’ and that we can cut $10 billion of the research out — never mind, as I say, that the entire budget is $9.6 billion, or $9.3 billion,” Kyl said.

Like Franks, Kyl believes that the only way to eventually deter Iran from launching an EMP attack on the United States is to deploy robust missile defense systems, including space-based interceptors.

The United States “needs a missile defense that is so strong, in all the different phases we need to defend against . . . that countries will decide it’s not worth coming up against us,” Kyl said.

“That’s one of the things that defeated the Soviet Union. That’s one of the ways we can deal with these rogue states . . . and also the way that we can keep countries that are not enemies today, but are potential enemies, from developing capabilities to challenge us. “

This weekend, yet another "deadline" passed for Iran to indicate it was seriously ready to discuss ending its pursuit of nuclear weapons. Like so many other deadlines during these five years of European-led negotiations, this one died quietly, with Brussels diplomats saying that no one seriously expected any real work on a Saturday.

The fact that the Europeans are right -- this latest deadline is not fundamentally big news -- is precisely the problem with their negotiations, and the Bush administration's acquiescence in that effort.

The rationality of continued Western negotiations with Iran depends critically on two assumptions: that Iran is far enough away from having deliverable nuclear weapons that we don't incur excessive risks by talking; and that by talking we don't materially impede the option to use military force. Implicit in the latter case is the further assumption that the military option is static -- that it remains equally viable a year from now as it is today.

Neither assumption is correct. Can we believe that if diplomacy fails we can still take military action "in time" to prevent Iranian nuclear weapons? "Just in time" nonproliferation assumes a level of intelligence certainty concerning Iran's nuclear program that recent history should manifestly caution us against.

Every day that goes by allows Iran to increase the threat it poses, and the viability of the military option steadily declines over time. There are a number of reasons why this is so.

First, while the European-led negotiations proceed, Iran continues both to convert uranium from a solid (uranium oxide, U3O8, also called yellowcake) to a gas (uranium hexafluoride, UF6) at its uranium conversion facility at Isfahan. Although it is a purely chemical procedure, conversion is technologically complex and poses health and safety risks.

As Isfahan's continuing operations increase both Iran's UF6 inventory and its technical expertise, however, the impact of destroying the facility diminishes. Iran is building a stockpile of UF6 that it can subsequently enrich even while it reconstructs Isfahan after an attack, or builds a new conversion facility elsewhere.

Second, delay permits Iran to increase its stock of low-enriched uranium (LEU) -- that is, UF6 gas in which the U235 isotope concentration (the form of uranium critical to nuclear reactions either in reactors or weapons) is raised from its natural level of 0.7% to between 3% and 5%.

As its LEU stockpile increases, so too does Tehran's capacity to take the next step, and enrich it to weapons-grade concentrations of over 90% U235 (highly-enriched uranium, or HEU). Some unfamiliar with nuclear matters characterize the difference in LEU-HEU concentration levels as huge. The truth is far different. Enriching natural uranium by centrifuges to LEU consumes approximately 70% of the work and time required to enrich it to HEU.

Accordingly, destroying Iran's enrichment facility at Natanz does not eliminate its existing enriched uranium (LEU), which the IAEA estimated in May 2008 to be approximately half what is needed for one nuclear weapon. Iran is thus more than two-thirds of the way to weapons-grade uranium with each kilogram of uranium it enriches to LEU levels. Moreover, as the LEU inventory grows, so too does the risk of a military strike hitting one or more UF6 storage tanks, releasing potentially substantial amounts of radioactive gas into the atmosphere.

Third, although we cannot know for sure, every indication is that Iran is dispersing its nuclear facilities to unknown locations, "hardening" against air strikes the ones we already know about, and preparing more deeply buried facilities in known locations for future operations. That means that the prospects for success against, say, the enrichment facilities at Natanz are being reduced.

Fourth, Iran is clearly increasing its defensive capabilities by purchasing Russian S-300 antiaircraft systems (also known as the SA-20) directly or through Belarus. In late July, Secretary of Defense Robert M. Gates and his spokesman contradicted Israeli contentions that the new antiaircraft systems would be operational this year. Assuming the Pentagon is correct, its own assessment on timing simply enhances the argument for Israel striking sooner rather than later.

Fifth, Iran continues to increase the offensive capabilities of surrogates like Syria and Hezbollah, both of which now have missile capabilities that can reach across Israel, as well as threaten U.S. troops and other U.S. friends and allies in the region. It may well be Syria and Hezbollah that retaliate initially after an Israeli strike on Iran's nuclear facilities, thus making further strikes against Iran more problematic, at least in the short run.

Iran is pursuing two goals simultaneously, both of which it is comfortably close to achieving. The first -- to possess all the capabilities necessary for a deliverable nuclear weapon -- is now almost certainly impossible to stop diplomatically. Thus, Iran's second objective becomes critical: to make the risks of a military strike against its program too high, and to make the likelihood of success in fracturing the program too low. Time favors Iran in achieving these goals. U.S. and European diplomats should consider this while waiting by the telephone for Iran to call.

Mr. Bolton, a senior fellow at the American Enterprise Institute, is the author of "Surrender Is Not an Option: Defending America at the United Nations" (Simon & Schuster, 2007).

SummaryWhat Tehran claimed was a successful launch of a “dummy” satellite Aug. 16 is being disputed by Washington — even as Iranian President Mahmoud Ahmadinejad offers to help other Muslim countries launch their own satellites. Despite the likely failure of the launch, the emergence of a multiple-stage satellite-launch vehicle in Iran is a significant event for both Tehran and Washington.

AnalysisIran’s claim that it successfully launched a “dummy” satellite Aug. 16 aboard its Safir Omid (“Envoy of Hope”) satellite-launch vehicle (SLV) was followed by two significant developments only days later. On Aug. 18, Tehran offered to help other Muslim nations put their own satellites into orbit, while the United States reported that the Iranian launch failed when the SLV’s second stage began to behave erratically. While the Safir Omid may indeed prove to have limited capability, the Iranian launch attempt was a noteworthy event nonetheless.

Related LinksThe Iranian Missile Program Iran: The Latest Satellite Launch United States: The Future of Ballistic Missile Defense Stratfor has long held that the ability to launch a satellite should not be considered beyond the reach of Iran’s scientists and engineers — an assertion we base largely on the North Korean example. Indeed, cooperation between Tehran and Pyongyang in missile development has been extensive, which means that the former can benefit significantly from the latter’s experience and design work. Based on this cooperation, Tehran already has the raw tools at its disposal to potentially achieve a successful launch.

Both countries’ missile programs rely heavily on the Soviet Scud design, which is itself based largely on the World War II German V-2, the world’s first true ballistic missile. The Scud design heritage is clearly evident in the base of the Iranian SLV’s first stage, where both the external fins (visible in the photo below, marked with Roman numerals) and the mountings for the exhaust vanes are evident.

VAHIDREZA ALAI/AFP/Getty ImagesIranian President Mahmoud Ahmadinejad being shown the Safir Omid satellite-launch vehicleThe width of the SLV suggests that its first stage is based on Iran’s Shahab-3 medium-range ballistic missile, and the distinctively tall height and slenderness that characterize the Iranian SLV is remarkably similar to the North Korean Taepodong-1. The main difference in outward appearance is the width of the second stage.

(click image to enlarge)This height and slenderness is generally considered to be inefficient by Western engineers. But the Scud is what Pyongyang and Tehran have to work with. Although the design has certainly been stretched further than it ever should have been, Pyongyang very nearly demonstrated in 1998 that it would get the job done.

The payload capacity, in all likelihood, is extremely limited — Iran is likely toying with the capability to orbit a radio transmitter smaller than Sputnik. What’s more, Iranian Scud-extrapolations do not appear to have demonstrated a meaningful level of accuracy to be useful as a military weapon. The limitations of the old Scud design also place upper limits on accuracy. Even if the missile could carry a larger payload, it is unlikely that the payload could be delivered with sufficient accuracy to threaten a specific target smaller than a major urban area. (And Iran’s ability to build a crude nuclear device, much less a weapon capable of being mounted on such a missile, remains in question.)

But SLVs have profound implications for a country’s long-range ballistic missile program. It is now clear that Tehran is tinkering with what appears to be a workable design based on North Korean experience that incorporates a second stage. Although the United States claims the second stage performed erratically, this may suggest that separation and ignition were indeed achieved — a significant step.

Iran has more or less hit a wall in terms of the distance it can cover with a single-stage ballistic missile. To further extend its reach, it must master missile staging. If it eventually succeeds in doing so, Tehran will demonstrate that capability to its domestic audience in the form of a nationalism-inspiring SLV. It will also give credence to Washington’s ballistic missile defense efforts in Europe.

Geopolitical Diary: Iranian Diplomacy in the CaucasusSeptember 18, 2008Iranian Foreign Minister Manouchehr Mottaki on Wednesday visited Georgia, where he met with Georgian President Mikhail Saakashvili. During the visit, Mottaki told the Georgian leader that Tehran was closely observing the ongoing events in the Caucasus and that his country wants stability and security in the region restored. The Iranian foreign minister also said that his government was in the process of offering solutions to various regional actors in the hopes of normalizing the regional situation.

Mottaki’s visit to Tbilisi comes a day after a meeting with his Armenian counterpart in Tehran and two days after talks with his German counterpart in Berlin. On Sept. 13, Mottaki held talks with Russian leaders in Moscow and then flew to Azerbaijan to confer with officials in Baku. This flurry of diplomatic activity on the part of the Iranians underscores Tehran’s deep interests in the Caucasus.

After seeing Turkey’s moves in the region in the wake of the Georgian crisis, the Iranians do not want to be left out of the game. The Iranian ethnic, religious, linguistic and cultural ties to the Caucasus go back centuries — long before the Ottomans took control of the Caucasus, Persian empires ruled major parts of the area.

We have talked about how a resurgent Russia presents Iran with an opening to extract concessions from the United States in Iraq and on the nuclear issue. In this regard, Tehran’s calculus is that a Washington wanting to counter a revived Kremlin would be eager to reach a settlement on Iraq to free itself for dealings with Moscow.

Iran’s cautious behavior toward Russia, however, suggests that Tehran is not ready to jump on the Russian bandwagon. There are three key reasons for this.

First, in order for Iran to reach its goals in terms of Iraq, the nuclear issue, and its own international rehabilitation, it needs to work with the United States. From the Iranian point of view, Russia is a means to an end and not a substitute for the United States.

Second, in the past Russia has used Iran for its own strategic purposes. Tehran is quite disappointed that Moscow has not followed through on any of its promises — whether with regard to security guarantees, weapons sales or even the failure to complete Iran’s first nuclear power plant (for which the Iranians have already paid).

Third, and most important, is that a Russia imposing itself on the Caucasus poses a long-term security threat to Iran’s northern borders. After all, it was not too long ago that the Soviet Union under Stalin invaded Iran. Hence, Iranian moves toward regional diplomacy are largely designed to ensure that a Russian resurgence can be kept at tolerable levels.

But the Turks have the lead in this arena, which raises the question of what the Iranians hope to gain from their attempts to play a role in the Caucasus. The best option for Iran would be to cooperate with Turkey toward the common goal of containing Russia. There is also the additional potential benefit of connecting with the United States via the Turks in the process, not to mention the potential energy links Iran could build to connect to Europe through the Turks.

There are, however, a number of obstacles that prevent Turkish-Iranian cooperation from materializing. To start, Iran would not want to irk Russia at a time when Tehran is still not getting a deal from the United States. The Turks are in a much more comfortable position to risk angering the Russians but the Iranians do not have that luxury. Ankara is the world’s 18th-largest economy and a member of NATO, while Iran has very few friends and is reeling from economic sanctions.

Another reason why Tehran cannot play much of a role in the Caucasus is that its only anchor in the region is Armenia, and that is a relationship of expediency. While the Turks and the Azerbaijanis are moving toward a rapprochement with the Armenians, it is unlikely that they will want to allow Iran — a historical competitor for regional influence (especially for the Turks) — to establish a foothold in the region. Essentially, Iran faces sufficient arrestors blocking its path to becoming a regional player in the Caucasus, which is not unlike the situation that it faces in the Middle East where wealthy Sunni Arab states are reining in its regional ambitions.

Regardless of the role it will or will not play in the Caucasus, Iranian moves in the region highlight a very critical element in Iranian foreign policy vis-a-vis Russia. The Islamic republic is not prepared to align with Russia in Moscow’s efforts to reassert itself on the global scene. This is a critical weakness that the United States can exploit to its advantage in countering both Iranian and Russian moves.

Iran's President Mahmoud Ahmadinejad visits the United Nations in New York this week. Don't expect an honest update from him on his country's nuclear program. Iran is now edging closer to being armed with nuclear weapons, and it continues to develop a ballistic-missile capability.

APIranian President Mahmoud Ahmadinejad.Such developments may be overshadowed by our presidential election, but the challenge Iran poses is very real and not a partisan matter. We may have different political allegiances and worldviews, yet we share a common concern -- Iran's drive to be a nuclear state. We believe that Iran's desire for nuclear weapons is one of the most urgent issues facing America today, because even the most conservative estimates tell us that they could have nuclear weapons soon.

A nuclear-armed Iran would likely destabilize an already dangerous region that includes Israel, Turkey, Iraq, Afghanistan, India and Pakistan, and pose a direct threat to America's national security. For this reason, Iran's nuclear ambitions demand a response that will compel Iran's leaders to change their behavior and come to understand that they have more to lose than to gain by going nuclear.

Tehran claims that it is enriching uranium only for peaceful energy uses. These claims exceed the boundaries of credibility and science. Iran's enrichment program is far larger than reasonably necessary for an energy program. In past inspections of Iranian nuclear sites, U.N. inspectors found rare elements that only have utility in nuclear weapons and not in a peaceful nuclear energy program. Iran's persistent rejection of offers from outside energy suppliers or private bidders to supply it with nuclear fuel suggests it has a motive other than energy in developing its nuclear program. Tehran's continual refusal to answer questions from the International Atomic Energy Agency (IAEA) about this troublesome part of its nuclear program suggests that it has something to hide.

The world rightfully doubts Tehran's assertion that it needs nuclear energy and is enriching nuclear materials for strictly peaceful purposes. Iran has vast supplies of inexpensive oil and natural gas, and its construction of nuclear reactors and attempts to perfect the nuclear fuel cycle are exceedingly costly. There is no legitimate economic reason for Iran to pursue nuclear energy.

Iran is a deadly and irresponsible world actor, employing terrorist organizations including Hezbollah and Hamas to undermine existing regimes and to foment conflict. Emboldened by the bomb, Iran will become more inclined to sponsor terror, threaten our allies, and support the most deadly elements of the Iraqi insurgency.

Tehran's development of a nuclear bomb could serve as the "starter's gun" in a new and potentially deadly arms race in the most volatile region of the world. Many believe that Iran's neighbors would feel forced to pursue the bomb if it goes nuclear.

By continuing to act in open defiance of its treaty obligations under the Nuclear Non Proliferation Treaty, Iran rejects the inspections mandated by the IAEA and flouts multiple U.N. Security Council resolutions and sanctions.

At the same time, Iranian leaders declare that Israel is illegitimate and should not exist. President Ahmadinejad specifically calls for Israel to be "wiped off from the map," while seeking the weapons to do so. Such behavior casts Iran as an international outlier. No one can reasonably suggest that a nuclear-armed Iran will suddenly honor international treaty obligations, acknowledge Israel's right to exist, or cease efforts to undermine the Arab-Israeli peace process.

Mr. Ahmadinejad is also the chief spokesman for a regime that represses religious and ethnic minorities, women, students, labor groups and homosexuals. A government willing to persecute its own people can only be viewed as even more dangerous if armed with nuclear weapons.

Finally, our economy has suffered under the burden of rising oil prices. Iran is strategically located on a key choke point in the world's energy supply chain -- the Strait of Hormuz. No one can suggest that a nuclear Iran would hesitate to use its enhanced leverage to affect oil prices, or would work to ease the burden on the battered economies of the world's oil importers.

Facing such a threat, Americans must put aside their political differences and send a clear and united message that a nuclear armed Iran is unacceptable.

That is why the four of us, along with other policy advocates from across the political spectrum, have formed the nonpartisan group United Against Nuclear Iran. Everyone must understand the danger of a nuclear-armed Iran and mobilize the power of a united American public in opposition. As part of the United Against Nuclear Iran effort, we will announce various programs in the months ahead that we hope will be rallying points for the American and international public to voice unified opposition to a nuclear Iran.

We do not aim to beat the drums of war. On the contrary, we hope to lay the groundwork for effective U.S. policies in coordination with our allies, the U.N. and others by a strong showing of unified support from the American people to alter the Iranian regime's current course. The American people must have a voice in this great foreign-policy challenge, and we can make a real difference through national and international, social, economic, political and diplomatic measures.

Mr. Holbrooke is a former U.S. ambassador to the United Nations. Mr. Woolsey is a former director of the Central Intelligence Agency. Mr. Ross was a special Middle East coordinator for President Clinton. Mr. Wallace was a representative of the U.S. to the U.N. for management and reform.

Imagine yourself as Mahmoud Ahmadinejad, now in your fourth year as president of Iran and about to make yet another appearance at the U.N.'s General Assembly in New York. Superficially -- but only superficially -- things do not appear to be going well.

APIranian President Mahmoud Ahmadinejad.Over the weekend, you replaced the head of your central bank over differences about an inflation rate of 28%, up from 12% in 2006. He's the second one to go in just a year. Ali Larijani, once your top nuclear negotiator, resigned last year over his objections to your confrontational style, and may challenge you in next year's presidential election. Your boss, the Supreme Leader Ayatollah Ali Khamenei, has also cooled on your presidency.

Abroad, your tenure has brought about three binding, albeit weak, U.N. sanctions. The often pliant International Atomic Energy Agency last week issued a scathing report, scoring your government for obstructing its investigations and citing evidence that your military has sought to refit long-range missiles to carry a nuclear warhead. Now France and Britain are pressing for another round of sanctions -- and another kick in the shins to your faltering economy.

As for your well-publicized doubts and disquisitions on the future of Israel, or the existence of homosexuality in Iran, or the Holocaust, or the divine halo you sensed the first time you spoke at the U.N., you have succeeded -- as George W. Bush never could have done on his own -- in convincing the American public that Iran is a clear and present danger. In Tel Aviv they say you must be a Mossad mole. Could the Islamic Republic possibly have an uglier face?

Of course not. And that's the whole point of your presidency. Your goal has been to define Iranian deviancy down. You've succeeded handsomely.

A decade ago, before anyone outside the torture chambers of Tehran's Evin prison knew your name, it was former president Akbar Hashemi Rafsanjani who personified the Iranian hard line. He green-lighted terrorist attacks on Jewish targets in Argentina; he refused to revoke the death sentence on novelist Salman Rushdie; a German court fingered him in the assassinations of Iranian-Kurdish dissidents in a Berlin restaurant. When Mohammad Khatami succeeded him as president, the world breathed a sigh of relief.

Now it is Mr. Rafsanjani who is often spoken of as a "pragmatist" and a "moderate" -- as compared to you.

As for the nuclear file, in 2004 the West's bottom line was that Iran had to suspend uranium enrichment as a precondition for negotiations. Mr. Khatami obliged (or at least pretended to); the West's negotiating position barely budged.

By contrast, since you took over you have installed thousands of centrifuges, spinning uranium roughly at a rate of a bomb's worth of fissile material every year. And while you've paid a price in U.N. sanctions, you've also caused Russia and China to split with the rest of the Security Council over stiffer penalties. Better yet, the Bush administration has gone from refusing to negotiate, to offering conditional negotiations, to pursuing low-level negotiations and now, lately, feeling its way toward tacit diplomatic normalization. All that without you bending an inch toward the West.

Above all, you have given the world time to digest the notion that Iran will inevitably become a nuclear power, and that nothing can be done to stop it -- at least at any kind of acceptable price. Will Americans agree to open a third military front in the Middle East? Does Israel, which couldn't so much as defeat Hezbollah, want to roll the dice on a bombing run that will spark another bloody regional war but retard Iran's nuclear programs by at most a few years? How will the U.S. afford its epic Wall Street bailouts if you shut down the Straits of Hormuz?

Surely your enemies will take no such risks. Which is why you're pleased that the more far-seeing Americans are coming around to your point of view. Look at former CIA spy Robert Baer. Mr. Baer has a new book arguing that the U.S. ought not "to stand in the way of Iran's quest to dominate Islam." He thinks Israel's nuclear arms should be put under U.N. supervision. He believes the U.S. and Iran are ripe for the kind of alliance Nixon forged with Mao.

It cannot surprise you that such ideas are now taking root with the American intelligentsia; useful idiots always contribute to the revolution.

And what about your own future? It's true that Iran has inflation and other economic headaches, but didn't the Imam Khomeini say he didn't start a revolution to bring down the price of melons? If the Almighty wills that you will leave office next year, so be it. As president, you have done more for the Islamic Republic in your four years than all your predecessors combined managed in their 25.

At its annual Vienna powwow this week, the world's nuclear watchdog is taking Iran for a few spins over its atomic ambitions. But the mullahs in Tehran know this diplomatic waltz well, and they can rest assured the dance merely frees up more time and space for them to get their bomb.

The International Atomic Energy Agency report does at least tell us the Iranians are closer than ever to becoming a nuclear power. In unusually scathing terms for an outfit disinclined to criticize Iran, the IAEA lays bare Tehran's lack of cooperation and implies it was hiding illegal military work related to its nuclear program. After six years of monitoring, says IAEA boss Mohamed ElBaradei, "the agency has not been able to make substantive progress" to resolve concerns about Iran's military ambitions.

According to the IAEA report, Iran had built up a stockpile of 1,058 pounds of "low-enriched" uranium hexafloride by the end of August. At this rate, as Gary Milhollin of Iran Watch pointed out in the New York Times, Iran will have the low-enriched uranium necessary to produce enough weapons-grade uranium for a bomb by mid-January. Iran has recently tested long-range missiles and tried to retrofit them to carry a nuclear warhead.

The five permanent members of the Security Council, plus Germany, are on record saying a nuclear Iran would be unacceptable. Surely the U.N., meeting in General Assembly last week days after the IAEA report came out, would respond with urgency. Sure enough, the Europeans and the U.S. suggested another round of sanctions, a position backed by China. And sure enough, Russia scotched those plans.

In its place, the Security Council adopted a resolution calling on Iran to abide by the previous three resolutions to suspend its enrichment program. Translation: "Stop -- or we'll do nothing." Condoleezza Rice called it "a very positive step." Her Russian counterpart Sergei Lavrov, a foreign minister in the Andrei Gromyko mold, was more honest: "This is a reiteration of the status quo."

The Russian ambassador at the U.N., Vitaly Churkin, claimed the irresolute resolution would channel "the minds of everybody in the direction of political rather than military enterprises." The potentially tragic irony is that the failure of resolve makes a military conflict more likely. If Iranian nuclear progress isn't halted by political or economic means, someone -- probably Israel -- will try to stop it by force.

The Security Council nonaction did give Iran a pretext to make fresh threats. A senior Iranian lawmaker told the state news agency that Iran would limit the IAEA's access to the known nuclear sites. The covert sites are off limits. Presumably he was speaking on orders. But the Europeans, joined in recent months by the Bush Administration, still claim to believe that Iran can be talked out of the bomb.

The Iranians have been offered everything from membership in the World Trade Organization to Western billions and backing for its energy sector, including civilian nuclear reactors. The mullahs mock those entreaties. And in the latest humiliation, Iran's terrorist client state with its own nuclear ambitions, Syria, was poised this week to win a seat on the IAEA's 35-member board. The U.S. and EU are trying to get Afghanistan in its place.

Both of America's Presidential candidates say they worry about a new nuclear arms race. The best way to stop proliferation, particularly in the combustible Middle East, is to start getting serious about stopping Iran from joining the club.

It's been a while since German military officers attended rallies that feature threats to Jews. Last month Berlin's defense attaché in Tehran resumed that tradition at Iran's annual military parade.

The German envoy had the privilege of hearing President Mahmoud Ahmadinejad promise to "break the hands" of invaders amid banners that read "Israel should be eradicated from the universe" and shouts of "Down with Israel" and "We will crush America under our feet."

Iran's parades are notorious for their "Death to Israel and America" slogans, which is why the European Union shuns these hate-filled spectacles. German Foreign Minister Frank-Walter Steinmeier was "very annoyed" about the attaché's faux pas, according to a report in Der Spiegel, and summoned Herbert Honsowitz, the ambassador to the Islamic Republic, to Berlin. Mr. Honsowitz, who is known for pushing trade between the two nations, has since returned to his post and is expected to serve out his term.

This episode illustrates the fundamental problem with Germany's attitude toward Iran: the disconnect between what Berlin says is its official policy goal -- stopping the mullahs' quest for nuclear arms -- and what Berlin actually does. Germany remains Iran's key Western trading partner. The German-Iranian Chamber of Industry and Trade counts about 2,000 members, including such big names as Siemens and BASF. In the first seven months of this year, Germany's Federal Office of Economics and Export Control approved 1,926 business deals with Iran -- an increase of 63% over last year. During that same period, German exports to Iran rose 14.1%.

For the record, French exports went up 21% during the first six months of the year, but they are still worth less than half of Germany's €2.2 billion of exports. Britain's exports to Tehran, only a fraction of Germany's trade with Iran, fell 20%. And while France and the U.K. are both pushing for tougher EU sanctions against Iran, Germany is reluctant to join their cause.

Given this reality, it's not surprising that Berlin's ambassador in Tehran apparently thought nothing of sending a military envoy to Iran's "Down with Israel" rally. He simply put Germany's mouth where its money already is.

Barack Obama's declaration that, if elected, he would be willing to sit down and talk to Iran "without preconditions" has been widely discussed in this country. It's a key policy difference between him and John McCain, who rejects unconditional talks with Tehran.

So what does the Islamic Republic think? The enterprising reporters at the state news agency recently asked a high-ranking official for his opinion on talks with the U.S. As it turns out, Iran has its own "preconditions" and they don't suggest a diplomatic breakthrough, or even a summit, anytime soon.

Mehdi Kalhor, Vice President for Media Affairs, said the U.S. must do two things before summit talks can take place. First, American military forces must leave the Middle East -- presumably including such countries as Iraq, Qatar, Turkey and anywhere else American soldiers are deployed in the region. Second, the U.S. must cease its support of Israel. Until Washington does both, talks are "off the agenda," the Islamic Republic News Agency reports. It quotes Mr. Kalhor as saying, "If they [the U.S.] take our advice, grounds for such talks would be well prepared.

Iran is one of the toughest and most urgent foreign policy problems the new U.S. Administration will face. If Mr. Obama ends up in the Oval Office on January 20, he may find that solving it will take more than walking into a room and talking to Iranians "without preconditions."

I’ve always been dubious about Barack Obama’s offer to negotiate with Iran — not because I didn’t believe that it was the right strategy, but because I didn’t believe we had enough leverage to succeed. And negotiating in the Middle East without leverage is like playing baseball without a bat.

Well, if Obama does win the presidency, my gut tells me that he’s going to get a chance to negotiate with the Iranians — with a bat in his hand.

Have you seen the reports that Iran’s president, Mahmoud Ahmadinejad, is suffering from exhaustion? It’s probably because he is not sleeping at night. I know why. Watching oil prices fall from $147 a barrel to $57 is not like counting sheep. It’s the kind of thing that gives an Iranian autocrat bad dreams.

After all, it was the collapse of global oil prices in the early 1990s that brought down the Soviet Union. And Iran today is looking very Soviet to me.

As Vladimir Mau, president of Russia’s Academy of National Economy, pointed out to me, it was the long period of high oil prices followed by sharply lower oil prices that killed the Soviet Union. The spike in oil prices in the 1970s deluded the Kremlin into overextending subsidies at home and invading Afghanistan abroad — and then the collapse in prices in the ‘80s helped bring down that overextended empire.

Under Ahmadinejad, Iran’s mullahs have gone on a domestic subsidy binge — using oil money to cushion the prices of food, gasoline, mortgages and to create jobs — to buy off the Iranian people. But the one thing Ahmadinejad couldn’t buy was real economic growth. Iran today has 30 percent inflation, 11 percent unemployment and huge underemployment with thousands of young college grads, engineers and architects selling pizzas and driving taxis. And now with oil prices falling, Iran — just like the Soviet Union — is going to have to pull back spending across the board. Fasten your seat belts.

The U.N. has imposed three rounds of sanctions against Iran since Ahmadinejad took office in 2005 because of Iran’s refusal to halt uranium enrichment. But high oil prices minimized those sanctions; collapsing oil prices will now magnify those sanctions. If prices stay low, there is a good chance Iran will be open to negotiating over its nuclear program with the next U.S. president.

That is a good thing because Iran also funds Hezbollah, Hamas, Syria and the anti-U.S. Shiites in Iraq. If America wants to get out of Iraq and leave behind a decent outcome, plus break the deadlocks in Lebanon and Israel-Palestine, it needs to end the cold war with Iran. Possible? I don’t know, but the collapse of oil prices should give us a shot.

But let’s use our leverage smartly and not exaggerate Iran’s strength. Just as I believe that we should drop the reward for the capture of Osama bin Laden — from $50 million to one penny, plus an autographed picture of Dick Cheney — we need to deflate the Iranian mullahs as well. Let them chase us.

Karim Sadjadpour, an Iran expert at the Carnegie Endowment for International Peace, compares it to bargaining for a Persian carpet in Tehran. “When you go inside the carpet shop, the first thing you are supposed to do is feign disinterest,” he explains. “The last thing you want to suggest is ‘We are not leaving without that carpet.’ ‘Well,’ the dealer will say, ‘if you feel so strongly about it ...’ ”

The other lesson from the carpet bazaar, says Sadjadpour, “is that there is never a price tag on any carpet. The dealer is not looking for a fixed price, but the highest price he can get — and the Iran price is constantly fluctuating depending on the price of oil.” Let’s now use that to our advantage.

Barack Hussein Obama would present another challenge for Iran’s mullahs. Their whole rationale for being is that they are resisting a hegemonic American power that wants to keep everyone down. Suddenly, next week, Iranians may look up and see that the country their leaders call “The Great Satan” has just elected “a guy whose middle name is the central figure in Shiite Islam — Hussein — and whose last name — Obama — when transliterated into Farsi, means ‘He is with us,’ ” said Sadjadpour.

Iran is ripe for deflating. Its power was inflated by the price of oil and the popularity of its leader, who was cheered simply because he was willing to poke America with a stick. But as a real nation-building enterprise, the Islamic Revolution in Iran has been an abject failure.

“When you ask young Arabs which leaders in the region they most admire,” said Sadjadpour, they will usually answer the leaders of Hamas, Hezbollah and Iran. “When you ask them where in the Middle East would you most like to live,” he added, “the answer is usually socially open places like Dubai or Beirut. The Islamic Republic of Iran is never in the top 10.”

A number of senior Iranian officials on Thursday issued positive statements toward the United States. One of those was Iranian President Mahmoud Ahmadinejad, who, in a rare move, congratulated U.S. President-elect Barack Obama on his electoral victory. Then the Islamic Republic’s Prosecutor-General, Ayatollah Qorban-Ali Dori-Najafabadi, called on Obama to demonstrate goodwill and end sanctions against Tehran. Elsewhere, Iranian Ambassador to Kuwait Ali Jannati said his country was ready to normalize relations with the United States and expressed hope that, under an Obama administration, Washington would change its policies toward Tehran.

Important to note in these various remarks is that they were made by prominent hard-liners as opposed to the more pragmatic conservative elements in the clerical regime. The most noteworthy of these was the Iranian envoy to Kuwait, who is the son of a very senior and powerful radical cleric, Ayatollah Ahmad Jannati, chairman of the Guardian Council — the body that vets candidates for public office and has the power of legislative oversight. So, the question is, why is the Ahmadinejad administration, which would normally be lambasting the United States, now acting all warm and fuzzy?

For starters, the Iranians, like many other international actors, expect an Obama administration — in a sharp departure from the attitude of its predecessor — would invest heavily in some bold diplomacy. From Tehran’s point of view, this potentially could provide the perfect opening for it to move ahead and consolidate its position vis-a-vis Iraq and the nuclear issue. The Iranians feel that they are well placed to negotiate with a new White House from a position of relative strength, especially given Obama’s need to make good on his electoral promise to disengage militarily from Iraq.

The interest of a geopolitically emergent Iran, however, is not the only factor informing Ahmadinejad’s calculus. Before it can truly improve its position, Tehran desperately needs to get ahead of a burgeoning economic crisis. Just two days ago, Iran’s deputy central bank governor for economic affairs, Ramin Pashaei, said that Tehran needs the price of oil to average a little over $60 a barrel until March 2009 (the end of the current Iranian year) to avoid “big problems.” It should be noted that on Thursday oil prices were barely able to stay at the $60 mark.

The faltering state of the Iranian economy is the sore point for Ahmadinejad, who is up for re-election in June 2009. He, therefore, desperately needs to show some sort of victory in order to secure his re-election. The president and his ultraconservative faction also realize that Tehran must bury the hatchet with the United States in order to achieve its objective of being a global player — and Ahmadinejad wants to be able to claim this success.

On the U.S. side of this equation, an Obama administration also will want to engage diplomatically with the clerical regime — but the million-dollar question is, how does it go about doing that without creating problems for itself both at home and internationally. The Bush administration, which was not bogged down with public doubts about its commitment to national security, has been unable to make much progress on this front.

Even in its fading moments, the Bush administration is struggling between the need to deal with Iran and the need to contain it. On Thursday, the Treasury Department imposed additional restrictions against Iran’s banks — a move that comes amid reports that the administration could announce the opening of a “U.S. interests section” in Iran before the end of November. The Bush administration has also had a hard time balancing its need to engage Iran with its commitment to its Arab allies and Israel.

For an Obama administration, this could create an even bigger problem, with the Israelis and the Arabs very uncomfortable with the new U.S. government reaching out to Iran. Israeli Foreign Minister Tzipi Livni, who is hoping to be prime minister in the aftermath of the Israeli election slated for February, expressed opposition to any move on the part of an Obama administration to talk to Iran. Similarly, Saudi King Abdullah, who is due to arrive in New York next week for an interfaith gathering at the United Nations, will reportedly be putting out feelers to Obama in an effort to gauge how the balance of power in the Persian Gulf will be affected by the moves to engage Iran.

Striking a balance between the need to reach a settlement with Iran (on Iraq, at least) and the need to maintain existing relationships with Israel and the Arab states could very well prove to be the most challenging foreign policy issue that the Obama administration will find itself struggling with very early on in its term.

I got this in the mail and here is a link to a position paper about the 30 year failure of negotiations with Iran. BO is going to continue down the same path. Iran may already even posses of bomb. Of course Iran sees as as weak now. Of course they will play the lets talk game. They have been doing it for decades. Yet "70%" of Iranians are not happy with the Radicals in control.

If Barack Obama is to persuade Iran to negotiate away its illegal nuclear weapons program, he will first need to generate more leverage than what the Bush administration is leaving him with. The current U.N. sanctions have proven too weak to dissuade Tehran's leaders, and Russia and China seem determined to keep those sanctions weak. Meanwhile, the regime continues to insist there are no incentives in exchange for which it would halt or even limit its nuclear work.

David KleinHowever, Tehran has an economic Achilles' heel -- its extraordinarily heavy dependence on imported gasoline. This dependence could be used by the United States to peacefully create decisive leverage over the Islamic Republic.

Iranian oil wells produce far more petroleum (crude oil) than Iran needs. Yet, remarkably for a country investing so much in nuclear power, Iran has not developed sufficient capacity to refine that crude oil into gasoline and diesel fuel. As a result, it must import some 40% of the gasoline it needs for internal consumption.

In recent months, Iran has, according to the respected trade publication International Oil Daily and other sources including the U.S. government, purchased nearly all of this gasoline from just five companies, four of them European: the Swiss firm Vitol; the Swiss/Dutch firm Trafigura; the French firm Total; British Petroleum; and one Indian company, Reliance Industries. If these companies stopped supplying Iran, the Iranians could replace only some of what they needed from other suppliers -- and at a significantly higher price. Neither Russia nor China could serve as alternative suppliers. Both are themselves also heavily dependent on imports of the type of gasoline Iran needs.

Were these companies to stop supplying gasoline to Iran, the world-wide price of oil would be unaffected -- the companies would simply sell to other buyers. But the impact on Iran would be substantial.

When Tehran attempted to ration gasoline during the summer of 2007, violent protests forced the regime to back down. Cutting off gasoline sales to Iran, or even a significant reduction, could have an even more dramatic effect.

In Congress, there is already bipartisan support for peacefully cutting off gasoline sales to Iran until it stops its illicit nuclear activities. Barack Obama, John McCain and the House of Representatives have all declared their support.

On June 4 of this year, for example, Sen. Obama said at a speech in Washington, D.C.: "We should work with Europe, Japan and the Gulf states to find every avenue outside the U.N. to isolate the Iranian regime -- from cutting off loan guarantees and expanding financial sanctions, to banning the export of refined petroleum to Iran."

He repeated this sentiment during the presidential candidates' debate on Oct. 7: "Iran right now imports gasoline . . . if we can prevent them from importing the gasoline that they need . . . that starts changing their cost-benefit analysis. That starts putting the squeeze on them."

How do we stop the gasoline from flowing? The Bush administration has reportedly never asked the Swiss, Dutch, French, British or Indian governments to stop gasoline sales to Iran by the companies headquartered within their borders. An Obama administration should make this request, and do the same with other governments if other companies try to sell gasoline to Iran.

But the U.S. also has significant direct leverage over the companies that currently supply most of Iran's imported gasoline.

Consider India's Reliance Industries which, according to International Oil Daily, "reemerged as a major supplier of gasoline to Iran" in July after taking a break for several months. It "delivered three cargoes of gasoline totaling around 100,000 tons to Iran's Mideast Gulf port of Bandar Abbas from its giant Jamnagar refinery in India's western province of Gujarat." Reliance reportedly "entered into a new arrangement with National Iranian Oil Co. (NIOC) under which it will supply around . . . three 35,000-ton cargoes a month, from its giant Jamnagar refinery." One hundred thousand tons represents some 10% of Iran's total monthly gasoline needs.

The Jamnagar refinery is heavily supported by U.S. taxpayer dollars. In May 2007, the U.S. Export-Import Bank, a government agency that assists in financing the export of U.S. goods and services, announced a $500 million loan guarantee to help finance expansion of the Jamnagar refinery. On Aug. 28, 2008, Ex-Im announced a new $400 million long-term loan guarantee for Reliance, including additional financing of work at the Jamnagar refinery.

Or consider the Swiss firm Vitol. According to International Oil Daily, Vitol "over the past few years has accounted for around 60% of the gasoline shipped to Iran." Vitol is currently building a $100 million terminal in Port Canaveral, Florida.

Last year, when Minnesota Gov. Tim Pawlenty discovered that an Indian company, Essar, was seeking to both invest some $1.6 billion in Minnesota and invest over $5 billion in building a refinery in Iran, he put Essar to a choice. Mr. Pawlenty threatened to block state infrastructure subsidies and perhaps even construction permits for the Minnesota purchase unless Essar withdrew from the Iranian investment. Essar promptly withdrew from the Iranian investment.

How to Put the Squeeze on Iran – Orde F. KittrieObama and Missile Defense – John R. BoltonIt's Time to Rethink Our Retirement Plans – Roger W. Ferguson Jr.The Minnesota example is not the only precedent. U.S. outreach to foreign banks and to oil companies considering investing in Iran's energy sector has reportedly convinced more than 80 banks and several major potential oil-field investors to cease all or some of their business with Iran. Among them: Germany's two largest banks (Deutsche Bank and Commerzbank), London-based HSBC, Credit Suisse, Norwegian energy company StatoilHydro, and Royal Dutch Shell.

A sustained initiative may be able to convince most or all current and potential suppliers that the profits to be gained from continuing to sell gasoline to Iran will be dwarfed by the lost loan guarantees and subsidies and foregone profits they will incur in the U.S. from continuing to do business with Iran.

Last Sunday, a group of 60 Iranian economists called for the regime to drastically change course, saying that President Mahmoud Ahmadinejad's "tension-creating" foreign policy has "scared off foreign investment and inflicted heavy damage on the economy." The economists said the current sanctions, as weak as they are, have cost Iran billions of dollars by forcing it to use middlemen for exports and imports. Halting Iran's gasoline supply could contribute to reaching a tipping point -- at which economic pressures and protests convince the regime its illicit nuclear program poses too great a risk to its grip over the Iranian people.

If the federal and key state governments in the U.S. were to make it their goal to achieve a halt by companies selling gasoline to Iran, it could be a game-changer. It may be our best remaining hope for peacefully convincing Iran to desist from developing nuclear weapons.

Mr. Kittrie is a professor of law at Arizona State University and a fellow at the Foundation for Defense of Democracies. He previously worked for 11 years at the U.S. Department of State, including as a specialist on nuclear nonproliferation and sanctions.

Iran’s deputy central bank governor, Hossein Qazavi, said Nov. 19 that Iran is considering issuing a $1 billion international bond “to attract international investment,” seven months after it repaid its last bond. The issuance would be Iran’s first since 2002, and only its third since the 1979 Islamic Revolution.

Through a bond market, countries look to “sell” their debts to international investors by parceling them into portions that can be bought individually. Raising money through the bond market is often easier than getting a loan from one or several banks; because the debt is divided into portions that investors of nearly any size can afford, banks and/or individuals with less capital on hand can come to the table. By getting more players involved, the country that needs its debt serviced can increase competition over the bond and thus decrease the price it has to pay for it. Of course, for this to work, someone actually has to want to buy the bond. Unlike a loan that is negotiated with one or several financial institutions, a bond market works on the principle of a market. It rewards credit-worthy countries whose debts are highly sought after (due to the state’s perceived financial strength and, therefore, its ability to repay the “loan” plus interest), and punishes countries that are not credit-worthy. In those terms, forays into the bond market are risky, as they potentially expose states to investor scrutiny.

The current conditions in global credit markets make investment in Iranian bonds highly unlikely, as very few sovereign or private investors have any money on hand, particularly to buy risky bonds. But leaving this aside, Qazavi’s announcement leads one to wonder about the overall health of the Islamic Republic.

With oil prices poised to sink below $50 per barrel any day now, Iran is scrambling to cover its budgetary costs, with potential social unrest looming if various government subsidies — particularly those for gasoline, which refinery-poor and gasoline-guzzling Iran must import — have to be cut. Tehran is staring social unrest in the face, and desperate times might call for such desperate measures as begging cash-strapped foreign investors for $1 billion.

Another problem with the bond issuance in the current geopolitical climate is that it is unclear whether any European or Asian bank would dare to finance the bond. Since 2002, when Iran’s last bond was issued, the United States has specifically targeted Iranian banks, cajoling the European Union to stop doing business with certain Iranian banks and getting more than 40 international banks to agree to halt business with Tehran. In October 2007, Washington also designated several Iranian banks as supporters of terrorism.

Furthermore, the United States’ Iran Sanctions Act (ISA), currently in place until 2011, strongly discourages foreign companies from investing in Iran’s energy sector and pledges retaliatory sanctions against those who do. In his announcement, Qazavi noted that the bond issuance would let investors “safely invest and take part in various projects including petrochemicals” — investments in which the ISA specifically tries to discourage the participation of non-U.S. entities. It’s unclear whether the ISA would give Washington the authority to put Iranian bond purchasers under sanctions, but the possibility clearly exists, and it will be enough to deter already bearish global investors.

On the flip side, Qazavi’s comments might be evidence that the latest round of negotiations between the Americans and Iranians are progressing well, and that they might even be nearing a conclusion. Washington’s ultimate goal in the negotiations is to limit Iran’s influence in Iraq, while Tehran wants to limit the United States’ ability to roll forces eastward from Baghdad. Negotiations began as early as months before the U.S. invasion of Iraq, but ultimately stalled on the most important issues, as an emboldened United States rejected Iran’s offers for a comprehensive deal on Iraq. Iran responded to the rebuff by restarting its nuclear program, and by supporting Hezbollah in its conflict with Israel in the summer of 2006, as well as backing Shiite groups in a flare-up of violence in Iraq in November of that year. The two sides went back to the negotiating table after the 2007 U.S. troop surge.

With the United States and Iraq inking a Status of Forces Agreement (SOFA) that will lead to the withdrawal of U.S. forces from Iraq in three years, it appears that Washington and Tehran also are now close to a deal. Iran’s judiciary chief, Ayatollah Mahmoud Hashemi Shahroudi, confirmed as much on Nov. 18, when he said the Iraqi government had done “very well” in approving the SOFA. It was the first time Tehran had voiced any sort of approval of the agreement. The United States of course hopes that the Baghdad of 2011 will be able to resist Tehran’s influence, and that the troop withdrawal will therefore be possible.

Qazavi’s comments on the $1 billion bond, put in the context of ongoing negotiations, suggest that Tehran might be betting that talks with the Americans are near an end. A U.S. rapprochement with Iran would certainly place a stamp of approval on foreign investment in Iran. Without such a stamp, any bond issuance would make little sense. Therefore, Iran either must be desperate for capital due to serious economic problems, or preparing for a positive announcement on the negotiating front.

The recent U.N. report that Iran may have enough nuclear material to build an atomic bomb is causing concern in Germany -- not over an Islamic bomb, but over the risk of tougher U.N. sanctions.

The German-Iranian Chamber of Commerce sponsored a seminar this week in Hamburg entitled "Iran Sanctions -- Practical Consequences for German Companies." The session was designed to help firms in "these difficult times" -- a reference to U.N. trade sanctions, not the global economy. Speakers included Sabine Hummerich from Bank Melli, Iran's largest bank. In June, the European Union froze Bank Melli's assets because of its ties to Tehran's nuclear program and barred dealings with the bank. This didn't stop organizers from inviting Ms. Hummerich to lecture about the "Financial Transaction of Iranian Business Deals."

As Europe's largest exporter to Iran, Germany has unique leverage over the regime. But Berlin refuses to use it. German exports to Iran are up 14.1% in the first seven months of this year. The Islamic Republic is so popular in Germany that another group, Management Circle, is planning a two-day crash course next month in Frankfurt. The program lists seven reasons for doing business with Iran, including "traditional good economic and political relations with Germany."

Readers may recall that Barack Obama assailed President Bush for not doing more diplomatically to contain Iran, including more vigorous sanctions. Job one on that score for Mr. Obama would seem to be persuading his many admirers in Germany. Good luck.

Iran's universities are again the scene of battles over the country's future. In the digital age, we're able to take a better peek inside.

Footage of recent student protests in Tehran, Shiraz and Hamedan are all over the Internet. In particular, one clip of a student dressing down a government dignitary reveals a remarkable willingness to defy the regime. On the video, a young man at Shiraz University rises to address the visiting speaker of parliament and former nuclear negotiator, Ali Larijani. "I'm not going to ask you a question because I don't accept you as the legitimate speaker or the parliament as legitimate," the student says, citing the elimination of opposition candidates in the previous parliamentary election.

Courtesy of YouTube.Sitting on stage before a hundred or so students, Mr. Larijani looks taken aback and says nothing. "Let me tell you what is weighing heavily on my heart," the student continues. "I hate three things. One, I hate [President] Mahmoud Ahmadinejad."

Applause erupts -- in itself an act of defiance, since the mullahs consider clapping, along with neckties, a Western habit. "Two, I hate him for his hypocrisy." At this point, some pro-regime students -- whom reports link to the government-sanctioned Basij organization, the mullahs' brown shirts -- interrupt with chants and heckles. Amid the mayhem, the video ends. We don't know the young man's name or what happened to him after this October 9 encounter. Some Iranians speculate he was arrested; others say he went into hiding.

Since the last student uprising was crushed six years ago, Iran has seen sporadic but growing resistance to the regime -- most recently at the "Student Day" rallies on December 6 that commemorate the 1953 killing of three demonstrators by the Shah's army. The Shiraz student calls to mind the lone man, that "unknown rebel," who stood up to Chinese tanks during the Tiananmen protests. President-elect Obama says the U.S. should engage Iran. As one of our friends points out, "He has a choice: Engage with what Larijani represents, or engage with the generation of that student."

By JOHN R. BOLTON"You'd have to be an idiot to trust the North Koreans," Secretary of State Condoleezza Rice said recently. Apparently unaware of the irony, she then predicted eventual success for the six-party talks on the North's nuclear weapons program.

President-elect Barack Obama has promised major changes in U.S. diplomacy and repeatedly criticized the Bush administration on both substance and style. Mr. Obama has pledged more negotiation and multilateralism -- less saber-rattling and "take it or leave it" unilateralism. While Iraq was Mr. Obama's focal point in the campaign, the biggest problem ahead is countering the proliferation of weapons of mass destruction.

But on proliferation, what is striking are the similarities between Mr. Obama and President George W. Bush's second term. Given Mr. Bush's recent record, continuity between the two presidencies is hardly reassuring. And where Mr. Obama differs with Mr. Bush, he is only more accommodating to the intractable rogues running Pyongyang and Tehran. This is decidedly bad news.

The recent, embarrassing collapse of the six-party talks starkly underlines how, under Mr. Obama, everything old will be new again. The talks are classic multilateral diplomacy, pursued since 2003 with notable deference to North Korea. There's been about as much engagement with Pyongyang as consenting adults can lawfully have.

The outcome of this Obama-style diplomacy was the same as all prior negotiations with the leaders of the world's largest prison camp. North Korea charged even for the privilege of sitting at the negotiating table, extracted concession after concession, endlessly renegotiated points that had been resolved, and ultimately delivered nothing of consequence in return.

The Opinion Journal WidgetDownload Opinion Journal's widget and link to the most important editorials and op-eds of the day from your blog or Web page.When pressed, North Korea would bluster and threaten to rain destruction on South Korea. "Experts" on North Korea would observe that this was just its style, nothing to worry about. Thus did the Bush administration enable the North's bullying behavior by proclaiming even greater willingness to offer further carrots.

Most recently in Beijing, Pyongyang refused to put in writing what U.S. negotiators say it committed to verbally -- namely, verifying its commitment to abandon its nuclear program. But even taking U.S. negotiators at their word, this did not constitute real verification. The charade of verification was only one more ploy to squeeze out U.S. concessions, which Mr. Bush's negotiators seemed prepared to give.

On Iran, also for over five years, Mr. Bush has endorsed vigorous European diplomacy. The Europeans offered every imaginable carrot to persuade Iran to drop its nuclear program in exchange for a different relationship with Europe and America. This produced no change in Iran's strategic objective of acquiring deliverable nuclear weapons. The only real consequence is that Iran is five years closer to achieving that objective. It now has indigenous mastery over the entire nuclear fuel cycle.

The Obama alternative? "Present the Iranian regime with a clear choice" by using carrots and sticks to induce Iran to give up its nuclear aspirations. What does Mr. Obama think Mr. Bush and the Europeans have been doing? Does he really think his smooth talking will achieve more than Europe's smoothest talkers, who were in fact talking for us the whole time?

In Today's Opinion Journal

REVIEW & OUTLOOK

The Euro Decade and Its LessonsTreasury to Ford: Drop Dead

TODAY'S COLUMNISTS

Declarations: In With the New – Peggy NoonanPotomac Watch: The Senate Goes Wobbly on Card Check – Kimberley A. Strassel

COMMENTARY:

Conservatives Can Unite Around the Constitution – Peter BerkowitzLet's Be Worthy of Their Sacrific – Karl RoveLet's Write the Rating Agencies Out of Our Law – Robert RosenkranzObama Promises Bush III on Iran – John R. BoltonIsrael's Policy Is Perfectly 'Proportionate' – Alan M. DershowitzWhile Mr. Obama has uttered only generalities on North Korea, his Iran policy will be worse than Mr. Bush's. He acts as though the years of failed efforts to dissuade Iran from going nuclear simply didn't happen. That is blindness, not continuity. And that's without Mr. Obama's pledge to meet personally with Iran's leaders, an incredible act of legitimization he seems willing to give away for nothing.

Neither North Korea nor Iran is prepared to voluntarily give up nuclear or ballistic missile programs. The Bush policy was flawed not because its diplomacy was ineffective or disengaged, not because it was too intimidating to its adversaries, and not because it lacked persistence. Mr. Bush's flaw was believing that negotiation and mutual concession could accomplish the U.S. objective -- the end of proliferation threats from Pyongyang and Tehran -- when the objectives of our adversaries were precisely the opposite. They sought to buy valuable time to improve and expand their nuclear programs, extract as many carrots as possible, and play for legitimacy on the world stage.

Iran and North Korea achieved their objectives through diplomacy. Mr. Bush failed to achieve his. How can Mr. Obama do better? For starters, he could increase the pressure on China, which has real leverage over North Korea, to press Kim Jong Il's regime in ways that the six-party talks never approached. Options on Iran are more limited, but meaningful efforts at regime change and assisting Israel should it decide to strike Iran's nuclear facilities would be good first steps.

Sadly, the chances Mr. Obama will adopt these policies are far less than the steadily dwindling possibility that the Bush administration might yet come back to reality. Mr. Obama's handling of the rogue states will -- at best -- continue the Bush policies, which failed to stop nuclear proliferation. Get ready for a dangerous ride.

Mr. Bolton, a senior fellow at the American Enterprise Institute, is the author of "Surrender Is Not an Option: Defending America at the United Nations" (Simon & Schuster, 2007).

The announcement late Friday that Lloyds bank has admitted to illegally transferring Iranian money into the U.S. deserves more public attention. The deferred prosecution agreement is a victory for the Manhattan District Attorney's office despite backroom foot-dragging from the U.S. Treasury. And it's further evidence of how deadly serious Iran is in seeking to buy parts for its missile and nuclear programs.

APUnder Lloyds TSB Group's deferred prosecution agreement with District Attorney Robert Morgenthau and the Justice Department, the British bank will pay a $350 million fine and, most important, share all its records on the Iranian transfers. If Lloyds continues to cooperate, neither the bank nor its executives will be criminally prosecuted for violating the 1977 International Emergency Economic Powers Act, under which the U.S. has imposed sanctions on Iran.

State-owned Iranian banks Saderat and Melli have been barred from the U.S. financial system for their ties to terrorism and nuclear proliferation, respectively, and were specifically cited in the U.N. Security Council's most recent sanctions order against Iran. But for years, Lloyds and other financial firms helped Iran's rogue banks infiltrate the U.S. Why did Iran's banks need American dollars? In some cases they appear to have purchased items within U.S. borders. In others, law enforcement sources believe the banks were channeling billions in cash through U.S. banks to third countries to parties demanding payment in dollars.

Our sources say the money trail often began at the Iranian Central Bank, which sent funds to banks Melli and Saderat, as well as to Bank Sepah, which a U.S. Treasury official has called "the financial linchpin of Iran's missile procurement network." The U.K. branches or subsidiaries of the Iranian banks would send electronic messages via the Swift banking payments system to Lloyds and possibly other financial houses. Employees at Lloyds would then re-key the data into a new Swift message, carefully removing any reference to Iran or its banks. Employees at the British bank called this "stripping." The sophisticated screening software at American banks would have raised red flags if the true source of the funds had been revealed, but coming from a respected British financial institution, they weren't questioned.

The Opinion Journal WidgetDownload Opinion Journal's widget and link to the most important editorials and op-eds of the day from your blog or Web page.Lloyds admits to stripping for Iran from 2001-2004, though it may have begun in the 1990s and wasn't detected by law enforcement until early 2007. But one reason for deferring prosecution is that Lloyds's employees began to raise questions and convinced the bank's leadership to end the illegal Iranian transfers via London by April of 2004. Lloyds's offices in Dubai and Tokyo continued to facilitate Iranian money transfers into the U.S. until October of that year. Illegal transfers from Sudan, similarly disguised to evade sanctions but at much lower dollar amounts, occurred through 2007.

We're told that records of transfers back to London suggest that the Iranians sometimes used overnight deposits in the U.S. to take advantage of favorable interest rates. But American officials are also now in a race to track down all of the ultimate destinations. Mr. Morgenthau's office, which has led this effort, suspects that some funds may have been used to purchase raw materials for long-range missiles.

In Today's Opinion Journal

REVIEW & OUTLOOK

Bank of the United States

TODAY'S COLUMNISTS

The Americas: Dictatorship for Dummies – Mary Anastasia O'GradyInformation Age: How the Music Industry Can Get Digital Satisfaction – L. Gordon Crovitz

COMMENTARY

Charter Schools Can Close the Education Gap – Joel I. Klein and Al SharptonTake It From McCain's Advisers: The GOP Would Raise Taxes – Matt MillerWhy Russia Stokes Mideast Mayhem – Garry KasparovThe U.S. Votes 'Present' at the U.N. – John R. BoltonWe're also told that nine other banks are being investigated, including another British bank, a Swiss bank and a German bank. But since any illegal activity does not appear to have involved the U.S. subsidiaries of foreign firms, there is a question of how cooperative the foreign banks will be. The biggest potential payoff from Lloyds's cooperation should be when the bank identifies for U.S. law enforcers all of the wire transfers that originated in Iran, thus helping the CIA and FBI track them to their final destinations.

The size of this financial cover-up shows the lengths Iran has been going to evade sanctions and expand its military arsenal. Mr. Morgenthau has done a service in releasing the details, all the more so given the strange reticence of the U.S. Treasury. Treasury has long pushed for tough financial sanctions on Iran. Yet in this case it fought against criminal sanction, preferring only a civil judgment, and it argued for a lower fine. One possible explanation is that Treasury Secretary Hank Paulson didn't want to offend British regulators by coming down too hard on one of their banks. However, it strikes us that helping Iran cover up its weapons-buying is serious enough to deserve the criminal sanction. Treasury officials declined our repeated invitations to comment.

Iran continues to make progress on its nuclear program, and yesterday the New York Times reported that President Bush refused a recent Israeli request for weapons that could help in any military strike against Tehran's nuclear sites. Whether or not that proves to be an historic mistake, it increases the importance of financial pressure on Iran. President-elect Obama has said he wants to toughen sanctions against Iran, and his new Treasury team can help by cooperating more with Mr. Morgenthau's investigation.

Susan Rice, the new U.S. envoy to the United Nations, on Monday echoed President Barack Obama’s campaign pledge to pursue a new approach in dealing with Iran, saying his administration intends to engage in direct diplomacy with Tehran.

Though relations between the countries have been pockmarked with “Death to America” slogans, trampled U.S. flags, militant proxy battles and nuclear plant centrifuges spinning in defiance, the U.S. occupation of Iraq gave Tehran and Washington many reasons to start talking again. Iran had a golden opportunity to consolidate Shiite influence in the heart of the Arab world, and the United States needed to deal with the Iranians to keep Iraq from tearing itself apart in a full-scale civil war.

Despite the long-standing tensions, the back-channel talks that had been taking place even before the United States invaded Iraq progressed, in the final phase of the Bush presidency, to the point that dialogue was able to break out into the public sphere, allowing the world to warm to the idea of the Great Satan talking to a member of the Axis of Evil. Now, after a year-long campaign filled with Iranian pledges to talk to the United States’ main adversaries, the sporadic and indirect negotiations are about to evolve into direct diplomatic talks. It’s been a rollercoaster relationship, but it is slowly and surely moving toward a more cooperative stance.

Signs of progress can already be seen: There are serious discussions about the U.S. State Department setting up a diplomatic office in Tehran, and hard-line Iranian ayatollahs are practically welcoming the Obama administration with open arms. We do not expect either Iran or the United States to rush the process, however. The Obama administration is still putting together a diplomatic team to develop an Iran strategy, and the Iranians have to get through presidential elections in June. That said, neither side is wasting time in laying the groundwork for a more constructive relationship.

The U.S. military drawdown in Iraq will be a significant confidence-building factor in these talks. With the world’s most powerful military force flanking them in both Iraq and Afghanistan, the Iranians have had more than a few sleepless nights over the past several years. The drawdown in Iraq has been made possible both by the success of the U.S. surge in stabilizing Iraq (which was also quietly facilitated to some extent by the Iranians) and a strategic need for the United States to refocus on Afghanistan, where a victory over al Qaeda and the Taliban is anything but assured.

The Iranians still will be faced with a residual U.S. military presence in Iraq over the longer term and a U.S.-Iraqi strategic partnership designed to counter Iranian influence, but they at least can be assured that within the next year, the United States will no longer be in an immediate offensive posture on their western frontier. In fact, the Pentagon is making contingency plans for the United States to complete the bulk of its withdrawal from Iraq by the end of 2010 — a year ahead of the deadline stipulated by the U.S.-Iraqi Status of Forces Agreement — pending Obama’s approval.

In addition to building confidence for U.S.-Iranian dialogue, moves toward an accelerated U.S. withdrawal also could open new doors for cooperation in Afghanistan. There is no love lost between Tehran and al Qaeda or the Taliban, but Iran has been heavily involved in arming the jihadist insurgency in Afghanistan – hoping to keep the United States too preoccupied to think about regime change in Tehran. The Islamic Revolutionary Guard Corps (IRGC) also has plenty of intelligence that the United States would appreciate concerning the movements of al Qaeda operatives who travel in and out of Iran under the IRGC’s watch. U.S. Central Command chief Gen. David Petraeus indicated recently that Afghanistan is an issue of mutual interest for Washington and Tehran. And with the U.S. military focus shifting from Iraq to Afghanistan, there is strong potential for a meeting of the minds between these two on how to contain the Taliban and eradicate al Qaeda.

Another test of U.S.-Iranian cooperation will concern the Mujahideen e-Khalq (MeK) — a cult-like Marxist-based group whose primary aim is to overthrow Iran’s clerical regime. Approximately 3,000 MeK members have been holed up in Camp Ashraf, in Iraq’s Diyala province, under the watch of the U.S. military throughout out the war. Tehran has worried that the United States and other Western powers could use the group as a tool to undermine the stability of the Iranian regime. Now that the United States is drawing down forces in Iraq, the Iranians want assurances from Washington that the MeK will not be able to reorganize. Mainly out of concern for human rights, the United States cannot simply extradite the MeK members to Iran or release them to authorities in Iraq, where they likely would be tortured and executed. For this reason, many of them are likely to find political asylum in the European Union, which voted Monday to remove the group from its list of terrorist organizations. The MeK threat might be a useful card for the United States and Europe to hold onto in their negotiations with Iran, but moving forward, Iran likely would demand some guarantees from the Obama administration that the group will be completely neutralized, in return for any potential cooperation on al Qaeda and the Taliban.

Of course, a number of significant challenges remain on the path toward rapprochement. In addition to the deep-set distrust that the United States and Iran have harbored for three decades, the nuclear issue — despite widely varying estimates on its threat value — remains a key sticking point in any diplomatic arrangement. This is especially true as the United States has to balance Iran against its relationship with Israel and the surrounding Arab states, which who all want to see Iran boxed in from all sides. While a full and imminent rapprochement might be wishful thinking, it is hard to deny these days that Iran and the United States are at least moving toward some sort of mutual understanding.

Somehow it seems fitting that this Jimmy Carter redux focuses on Iran.

Revealed: the letter Obama team hope will heal Iran riftSymbolic gesture gives assurances that US does not want to topple Islamic regimeRobert Tait and Ewen MacAskill in Washingtonguardian.co.uk, Thursday 29 January 2009 01.44 GMT larger | smallerOfficials of Barack Obama's administration have drafted a letter to Iran from the president aimed at unfreezing US-Iranian relations and opening the way for face-to-face talks, the Guardian has learned.

The US state department has been working on drafts of the letter since Obama was elected on 4 November last year. It is in reply to a lengthy letter of congratulations sent by the Iranian president, Mahmoud Ahmadinejad, on 6 November.

Diplomats said Obama's letter would be a symbolic gesture to mark a change in tone from the hostile one adopted by the Bush administration, which portrayed Iran as part of an "axis of evil".

It would be intended to allay the suspicions of Iran's leaders and pave the way for Obama to engage them directly, a break with past policy.

State department officials have composed at least three drafts of the letter, which gives assurances that Washington does not want to overthrow the Islamic regime, but merely seeks a change in its behaviour. The letter would be addressed to the Iranian people and sent directly to Iran's supreme leader, Ayatollah Ali Khamenei, or released as an open letter.

One draft proposal suggests that Iran should compare its relatively low standard of living with that of some of its more prosperous neighbours, and contemplate the benefits of losing its pariah status in the west. Although the tone is conciliatory, it also calls on Iran to end what the US calls state sponsorship of terrorism.

The letter is being considered by the new secretary of state, Hillary Clinton, as part of a sweeping review of US policy on Iran. A decision on sending it is not expected until the review is complete.

In an interview on Monday with the al-Arabiya television network, Obama hinted at a more friendly approach towards the Islamic Republic.

Ahmadinejad said yesterday that he was waiting patiently to see what the Obama administration would come up with. "We will listen to the statements closely, we will carefully study their actions, and, if there are real changes, we will welcome it," he said.

Ahmadinejad, who confirmed that he would stand for election again in June, said it was unclear whether the Obama administration was intent on just a shift in tactics or was seeking fundamental change. He called on Washington to apologise for its actions against Iran over the past 60 years, including US support for a 1953 coup that ousted the democratically elected government, and the US shooting down of an Iranian passenger plane in 1988.

The state department refused to comment yesterday on the draft letters.

US concern about Iran mainly centres on its uranium enrichment programme, which Washington claims is intended to provide the country with a nuclear weapons capability. Iran claims the programme is for civilian purposes.

The diplomatic moves are given increased urgency by fears that Israel might take unilateral action to bomb Iranian nuclear facilities.

The scale of the problem facing the new American president was reinforced yesterday when a senior aide to Ahmadinejad, Aliakbar Javanfekr, said that, despite the calls from the US, Iran had no intention of stopping its nuclear activities. When asked about a UN resolution calling for the suspension of Iran's uranium enrichment, Javanfekr, the presidential adviser for press affairs, replied: "We are past that stage."

One of the chief Iranian concerns revolves around suspicion that the US is engaged in covert action aimed at regime change, including support for separatist groups in areas such as Kurdistan, Sistan-Baluchestan and Khuzestan.

The state department has repeatedly denied that there is any American support for such groups.

In its dying days, the Bush administration was planning to open a US interests section in the Iranian capital Tehran, one step down from an embassy. Bush's secretary of state, Condoleezza Rice, said that never happened because attention was diverted by the Russian invasion of Georgia. Others say that rightwingers in the Bush administration mounted a rearguard action to block it.

The idea has resurfaced, but if there are direct talks with Iran, it may be decided that a diplomatic presence would obviate the need for a diplomatic mission there, at least in the short term.

While Obama is taking the lead on policy towards Iran, the administration will soon announce that Dennis Ross will become a special envoy to the country, following the appointments last week of George Mitchell, the veteran US mediator, as special envoy to the Middle East, and Richard Holbrooke, who helped to broker the Bosnia peace agreement, as special envoy to Pakistan and Afghanistan.

Ross, who took a leading role in the Middle East peace talks in Bill Clinton's administration, will be responsible on a day-to-day basis for implementing policy towards Iran.

In a graphic sign of Iranian mistrust, the hardline newspaper Kayhan, which is considered close to Ayatollah Ali Khamenei, has denounced Ross as a "Zionist lobbyist".

Saeed Leylaz, a Tehran-based analyst, said a US letter would have to be accompanied by security guarantees and an agreement to drop economic sanctions. "If they send such a letter it will be a very significant step towards better ties, but they should be careful in not thinking Tehran will respond immediately," he said.

"There will be disputes inside the system about such a letter. There are lot of radicals who don't want to see ordinary relations between Tehran and Washington. To convince Iran, they should send a very clear message that they are not going to try to destroy the regime."

US President Barack Obama's offer to talk to Iran shows that America's policy of "domination" has failed, the government spokesman said on Saturday. "This request means Western ideology has become passive, that capitalist thought and the system of domination have failed," Gholam Hossein Elham was quoted as saying by the Mehr news agency.

"Negotiation is secondary, the main issue is that there is no way but for (the United States) to change," he added. After nearly three decades of severed ties, Obama said shortly after taking office this month that he is willing to extend a diplomatic hand to Tehran if the Islamic republic is ready to "unclench its fist".

In response, Iranian President Mahmoud Ahmadinejad launched a fresh tirade against the United States, demanding an apology for its "crimes" against Iran and saying he expected "deep and fundamental" change from Obama. Iranian politicians frequently refer to the US administration as the "global arrogance", "domineering power" and "Great Satan". Tensions with the United States have soared over Iran's nuclear drive and Ahmadinejad's vitriolic verbal attacks against Washington's close regional ally Israel.

Former US president George W. Bush refused to hold talks with the Islamic republic -- which he dubbed part of an "axis of evil" -- unless it suspended uranium enrichment, and never took a military option to thwart Tehran's atomic drive off the table.

The new administration of Obama has also refused to rule out any options -- including military strikes -- to stop Tehran from acquiring a nuclear weapon. Iran denies any plans to build the bomb and insists its nuclear programme is solely aimed at peaceful ends.

"The new administration of Obama has also refused to rule out any options -- including military strikes"

Empty bluffs like these are nothing short of ridiculous. Now if BO really wants to scare the beegeebees out of Ahmadinejad he should challenge him to a one on one game of HOOPS - winner take all. Now that is scary (and believable).

The U.S. Treasury Department added the Free Life Party of Kurdistan (PJAK) to its list of terrorist organizations on Wednesday. PJAK is a sister organization of the Kurdistan Workers’ Party (PKK), the prominent Kurdish guerrilla group that operates in Turkey and has bases in northern Iraq. PJAK also has bases in northern Iraq, but focuses its operations on northwestern Iran, where that country’s Kurdish minority is concentrated.

The timing of the Treasury move is significant. Tehran has complained for some time that the United States, in collaboration with Israeli and Western intelligence organizations, supports groups like PJAK whose aim is to undermine the stability of the Iranian regime.

And the Iranians have cause for concern. The geopolitical core of Iran, where the population is most densely concentrated, is in the mountainous northern and central regions. That geography itself creates ample opportunities for foreign rivals or domestic opponents to stir up trouble for the regime: Since only about half of the population is ethnically Persian, one of Iran’s chief security imperatives is to contain minority ethnic groups dispersed throughout the mountains. The group of biggest concern for the Iranians has been Mujahideen e-Khalq (MeK), a cult-like Islamist-Marxist rebel group with the explicit goal of overthrowing the clerical regime.

MeK fighters have been holed up in Iraq’s Diyala province, under the watch of the U.S. military – but now that U.S. troops are withdrawing from Iraq in large numbers, something must done about the approximately 3,000 MeK members. Iran wants guarantees that groups like the MeK and PJAK will be neutralized. By placing PJAK on the U.S. terror list, Washington has made a symbolic move that tells Tehran that it is prepared to make certain concessions that will allow the clerical regime to rest more comfortably.

It is not clear yet how favorably the Iranians might respond to this move. U.S. President Barack Obama’s administration has made it clear that it will pursue engagement with Iran, and a number of backchannel discussions have been set into motion. But the Iranians are taking things slowly. With presidential elections approaching in June, Tehran is struggling to work out its next steps in negotiating with Washington. There is also more work to be done to prepare the Iranian public psychologically for public negotiations with the so-called “Great Satan.”

Iran’s priority right now is to convince the populace and surrounding states that Tehran is pursuing these negotiations from a position of strength. It intends to demonstrate that strength with things like satellite launches, pronouncements that wax philosophic about Iran’s nuclear achievements, and political victories in neighboring Iraq. Meanwhile, the United States is grappling with the complexities of an engagement policy through gestures such as the blacklisting of PJAK – even as Washington tries to downplay more contentious issues like Iran’s nuclear program, and to maintain a hard-line stance on sanctions.

There remains a long way to go in revising the U.S.-Iranian narrative of negotiations, but Tehran has little time to stall. The Iranians need to negotiate with the United States over common interests in Iraq, especially if they want to secure an internationally recognized sphere of influence there. Although final results are not yet known, provincial elections in Iraq this past weekend appear to have strengthened factions that complicate Iran’s ambitions there – and that, in turn, bodes well for the security situation and a U.S. drawdown. The Iranians are slowly coming to terms with the fact that Washington will have a significant stake in Baghdad well after the withdrawal, especially as figures like Iraqi Prime Minister Nouri al-Maliki are strengthening central authority at the expense of Iran’s closest Shiite allies. And even when the drawdown is complete, a residual force of probably 10,000 to 20,000 American troops will remain in Iraq, to keep the Iranians at bay and allay the fears of Iraq’s Sunni minority.

Of course, there are still plenty of things for Tehran to discuss with Washington that would help Iran to break out of its isolation. The United States and its NATO allies are turning to Tehran for assistance in neighboring Afghanistan, where Iran can provide intelligence and logistical support to help contain the Taliban. Cooperation with the Americans over Afghanistan isn’t nearly as touchy a subject as cooperation over Iraq — Afghanistan hasn’t invaded Iran in recent memory, and Iraq has. But it still would mean breaking the ice publicly and sitting down for talks.

SummaryIranian President Mahmoud Ahmadinejad on Feb. 3 declared a nighttime indigenous satellite launch a success. The technology required to pull off such a launch is, by and large, also applicable to an intercontinental ballistic missile. Though responses from foreign governments have been slow to come in, such a success — if genuine — will give Tehran new leverage with the United States and Europe.

Iran claims to have inserted a small telecommunications satellite into orbit during a nighttime launch broadcast on Iranian state television Feb. 3, amid the 10-day celebration of the 30th anniversary of the 1979 Islamic Revolution. Iranian President Mahmoud Ahmadinejad addressed the country on television, calling the launch a success.

If the claims are true, the event would mark the first indigenously designed and built satellite Iran has put into orbit on its Safir Omid (“Envoy of Hope”) satellite launch vehicle (SLV), which is also indigenously designed and built. This is a feat Iran apparently failed to accomplish last August (and something North Korea just barely failed to do in 1998 with its first Taepodong SLV). While this satellite insertion is a significant development in and of itself for the Iranian missile program, it has much more far-reaching implications for Iran’s relations with other powers.

Stratfor argued two years ago that such a launch was quite feasible based on Iranian cooperation with North Korea and Pakistan in missile development. The Safir Omid has the same distinctive narrow, elongated shape as North Korea’s Taepodong series. Indeed, North Korea is currently moving its own latest Taepodong SLV to a new launch facility on the country’s northwest coast for an anticipated launch later this spring.

Both the Taepodong and the Safir Omid rely heavily on the Russian Scud design, which is itself based heavily on the Nazi V-2 from World War II and has likely been pushed beyond its inherent design limitations in many ways. A demonstration of successful staging and satellite insertion, however, is also a demonstration of rudimentary intercontinental ballistic missile (ICBM) capability. The distinction between an SLV and an ICBM is largely one of guidance and payload. (This is not to say, however, that an ICBM version of the Safir Omid would necessarily have anywhere near the range to reach the continental United States on a conventional ballistic trajectory, that it has any meaningful degree of accuracy, or that Iran is anywhere near having a nuclear device that could be mounted on it.)

For the United States, the launch certainly gives new impetus to the argument in favor of completing a pair of U.S. ballistic missile defense (BMD) installations slated to be built in Poland and the Czech Republic. While the new administration of President Barack Obama has thus far kept its position on these installations deliberately ambiguous, it will be the White House’s first major policy choice on BMD. And Iran might have just made it more difficult (though hardly impossible) to delay the building of these installations, much less to cancel them outright.

The Iranian launch also comes close on the heels of a Feb. 2 announcement by NATO that it would permit member states to make independent, bilateral arrangements with Tehran for the transit of supplies to NATO military forces in Afghanistan. The relationship between the West and Iran is complex, especially as most or all of Europe is likely within range of an Iranian ICBM version of the Safir Omid. The launch will not necessarily derail such transit talks, but Iran’s relationships with even the more amenable European powers still face significant hurdles. But as North Korea has so aptly demonstrated, such launches — in addition to serving as nationalistic fodder for domestic audiences — can have very real utility in international negotiations.

Geopolitical Diary: A U.S. Treasury Move and a Signal to IranFebruary 5, 2009

The U.S. Treasury Department added the Free Life Party of Kurdistan (PJAK) to its list of terrorist organizations on Wednesday. PJAK is a sister organization of the Kurdistan Workers’ Party (PKK), the prominent Kurdish guerrilla group that operates in Turkey and has bases in northern Iraq. PJAK also has bases in northern Iraq, but focuses its operations on northwestern Iran, where that country’s Kurdish minority is concentrated.

The timing of the Treasury move is significant. Tehran has complained for some time that the United States, in collaboration with Israeli and Western intelligence organizations, supports groups like PJAK whose aim is to undermine the stability of the Iranian regime.

And the Iranians have cause for concern. The geopolitical core of Iran, where the population is most densely concentrated, is in the mountainous northern and central regions. That geography itself creates ample opportunities for foreign rivals or domestic opponents to stir up trouble for the regime: Since only about half of the population is ethnically Persian, one of Iran’s chief security imperatives is to contain minority ethnic groups dispersed throughout the mountains. The group of biggest concern for the Iranians has been Mujahideen e-Khalq (MeK), a cult-like Islamist-Marxist rebel group with the explicit goal of overthrowing the clerical regime.

MeK fighters have been holed up in Iraq’s Diyala province, under the watch of the U.S. military – but now that U.S. troops are withdrawing from Iraq in large numbers, something must done about the approximately 3,000 MeK members. Iran wants guarantees that groups like the MeK and PJAK will be neutralized. By placing PJAK on the U.S. terror list, Washington has made a symbolic move that tells Tehran that it is prepared to make certain concessions that will allow the clerical regime to rest more comfortably.

It is not clear yet how favorably the Iranians might respond to this move. U.S. President Barack Obama’s administration has made it clear that it will pursue engagement with Iran, and a number of backchannel discussions have been set into motion. But the Iranians are taking things slowly. With presidential elections approaching in June, Tehran is struggling to work out its next steps in negotiating with Washington. There is also more work to be done to prepare the Iranian public psychologically for public negotiations with the so-called “Great Satan.”

Iran’s priority right now is to convince the populace and surrounding states that Tehran is pursuing these negotiations from a position of strength. It intends to demonstrate that strength with things like satellite launches, pronouncements that wax philosophic about Iran’s nuclear achievements, and political victories in neighboring Iraq. Meanwhile, the United States is grappling with the complexities of an engagement policy through gestures such as the blacklisting of PJAK – even as Washington tries to downplay more contentious issues like Iran’s nuclear program, and to maintain a hard-line stance on sanctions.

There remains a long way to go in revising the U.S.-Iranian narrative of negotiations, but Tehran has little time to stall. The Iranians need to negotiate with the United States over common interests in Iraq, especially if they want to secure an internationally recognized sphere of influence there. Although final results are not yet known, provincial elections in Iraq this past weekend appear to have strengthened factions that complicate Iran’s ambitions there – and that, in turn, bodes well for the security situation and a U.S. drawdown. The Iranians are slowly coming to terms with the fact that Washington will have a significant stake in Baghdad well after the withdrawal, especially as figures like Iraqi Prime Minister Nouri al-Maliki are strengthening central authority at the expense of Iran’s closest Shiite allies. And even when the drawdown is complete, a residual force of probably 10,000 to 20,000 American troops will remain in Iraq, to keep the Iranians at bay and allay the fears of Iraq’s Sunni minority.

Of course, there are still plenty of things for Tehran to discuss with Washington that would help Iran to break out of its isolation. The United States and its NATO allies are turning to Tehran for assistance in neighboring Afghanistan, where Iran can provide intelligence and logistical support to help contain the Taliban. Cooperation with the Americans over Afghanistan isn’t nearly as touchy a subject as cooperation over Iraq — Afghanistan hasn’t invaded Iran in recent memory, and Iraq has. But it still would mean breaking the ice publicly and sitting down for talks.

While the U.S. has ratcheted up its efforts to prevent Iran from obtaining nuclear arms, the Islamic Republic is reaping a windfall from European companies. These firms' deals aid a regime that is bent on developing nuclear weapons and which financially supports the terror organizations Hamas and Hezbollah.

The Austrian oil giant OMV is itching to implement a €22 billion agreement signed in April 2007 to produce liquefied natural gas from Iran's South Pars gas field; at last May's annual shareholder meeting, Chief Executive Officer Wolfgang Ruttenstorfer said OMV was only waiting for "political change in the U.S.A." Raiffeisen Zentralbank, Austria's third-largest bank, is active in Iran and, according to a story by the Journal's Glenn Simpson last February, has absorbed the transactions of key European banks that shut down their operations in Iran. And in late January Paolo Scaroni, CEO of Italian energy corporation Eni SpA, told the Associated Press that his firm will continue to fulfill its contractual obligations in Iran and feels no external pressure to sever ties with Iran's energy sector.

The Opinion Journal WidgetDownload Opinion Journal's widget and link to the most important editorials and op-eds of the day from your blog or Web page.Yet because of the sheer volume of its trade with Iran, Germany, the economic engine of Europe, is uniquely positioned to pressure Tehran. Still, the obvious danger of a nuclear-armed Iran has not stopped Germany from rewarding the country with a roughly €4 billion trade relationship in 2008, thereby remaining Iran's most important European trade partner. In the period of January to November 2008, German exports to Iran grew by 10.5% over the same period in 2007. That booming trade last year included 39 "dual-use" contracts with Iran, according to Germany's export-control office. Dual-use equipment and technology can be used for both military and civilian purposes.

One example of Germany's dysfunctional Iran policy is the energy and engineering giant Siemens. The company acknowledged last week at its annual stockholder meeting in Munich, which I attended, that it conducted €438 million in trade with Iran in 2008, and that its 290 Iran-based employees will remain active in the gas, oil, infrastructure and communications sectors.

Concerned stockholders and representatives from the political organization Stop the Bomb, a broad-based coalition in Germany and Austria seeking to prevent Iran from building a nuclear-weapons program, peppered Siemens CEO Peter Löscher with questions about the corporation's dealings with the Iranian regime. A Stop the Bomb spokesman questioned Siemens's willingness to conduct business with a country known for its human- and labor-rights violations, ranging from the violent oppression of women to the murder of gays to the repression of religious and ethnic minority groups. The spokesman referred to Siemens's Nazi-era history as an employer of forced labor from the Auschwitz extermination camp and asked how, in light of the corporation's Nazi history, the company could support an "anti-Semitic and terrorist regime" that threatens to wipe Israel off the map.

Mr. Löscher replied to the 9,500 stockholders in Olympic Hall that, "For Siemens, compliance and ethics have the highest priority, including where human-rights issues are involved." Yet, after further questions from the Stop the Bomb spokesman, he acknowledged that Siemens and its joint partner, Nokia, had delivered state-of-the-art communications surveillance technology to Iran last spring.

Information-technology experts say that the companies' "monitoring centers" are used to track mobile and land-line telephone conversations, and that their "intelligence platform" systems allow the Iranian secret service to track financial transactions and airplane movements. The technologies could also be used to monitor persecuted minority and dissident groups in Iran.

Siemens, the largest German trade partner of Iran, represents a window onto an opulent economic partnership between the two countries. German firms such as Mercedes-Benz, whose Web site lists an Iranian general distributor, and insurance giant Munich Re have also remained indifferent to the growing calls to isolate Iran economically. Yesterday, a Munich Re spokesman confirmed to me that the company insures goods in transit to Iran. This was the first such public disclosure by the firm.

And the deals just keep on coming. The Hannoversche Allgemeine newspaper, for example, reported in late January that the German engineering firm Aerzen secured a contract totaling €21 million to supply process gas blowers and screw-type compressors to a steel factory in Esfahan, Iran.

All of this is taking place while Iran is moving at an astonishing pace to process high-grade uranium for its atomic bomb. Iran's launch of its first domestically produced satellite on Tuesday prompted an alarmed French Foreign Ministry spokesman Eric Chevallier to underscore the link between Iran's military nuclear capability and its compatibility with the satellite technology.

Trade and security experts assert that Iran cannot easily replace high-tech German engineering technology with that from competitor nations such as China and Russia. The hollow pleas by Chancellor Angela Merkel, who favors a policy of moral pressure to convince corporations to be "sensitive" about cutting new deals with the regime in Tehran, did not prevent her administration from approving over 2,800 commercial deals with Iran in 2008.

Transparency is badly needed in this area. The German Federal Office of Economics and Export Control (BAFA) refuses to disclose the nature of these agreements. Economics Minister Michael Glos, who oversees BAFA and is considered an advocate of trade with Iran, should reveal the names of the firms commencing trade with a country that sponsors terror organizations such as Hezbollah and Hamas. The German firms are hiding behind a wall of nondisclosure to avoid being blacklisted on the U.S market.

The Merkel administration heavily subsidizes investments in Iran by providing German firms with €250 million in credit guarantees. A day before the International Holocaust Remembrance Day on Jan. 27, the German business daily Handelsblatt reported that Berlin intended to discontinue all credit guarantees supporting trade with Iran. After the report was picked up by the major media, Mrs. Merkel's spokesman quietly denied that the government had canceled the credit guarantees. This suggests that Berlin cynically leaked the story to Handelsblatt to polish its international image and repair strained relations with Israel, a country whose security Chancellor Merkel has deemed "nonnegotiable" for Germany.

There are other signs that Germany's political elites consider Iran just another trading partner. Former Chancellor Gerhard Schröder is scheduled to visit Iran in late February, just after 10 days of celebrations in the country honoring Ayatollah Khomeini and the radical Islamic state he ushered in 30 years ago. Mr. Schröder, who plans to attend the dedication of a foundation for supporting scientific research and has opposed the imposition of sanctions on the Iranian regime, surely will not use the opportunity to criticize Germany's booming trade relationship with the Islamic Republic of Iran.

In short, while Berlin claims it wants to discourage Iran from building a nuclear bomb, it has so far done little to actually stop the bomb. German legislation prohibiting trade with Iran, coupled with an immediate cessation of credit guarantees, would decisively setback, if not stop, Iran's nuclear weapons program and set an invaluable example for other EU countries to adapt for their own companies.